The fallout of financial frauds in the cryptocurrency industry could be devastating and finally regulators are taking note of it. Indeed, regulators are scurrying to bring in a fresh set of guidelines to ensure that the collapse of cryptocurrency network does not end up posing a systemic risk. Some questions remain to be answered though. And how rapidly and effectually these questions are answered will help to secure the cryptocurrency space from risks.
One of the reasons behind the changing compliance framework is that ransomware incidents, frauds and financial crimes such as exchanges that launder ransomware payments has been increasing. For the first six months of the year, U.S. banks reported almost $600 million in transactions associated with possible ransomware payments, according to the WSJ.
Earlier this year, the U.S treasury department’s Office of Foreign Asset Control (OFAC) responsible for digital currency market, issued a set of guidelines for virtual currency companies. The standards and principles require virtual currency companies to implement geolocation tools for identifying and blocking IP addresses originating from banned countries among a host of other guidelines that include monitoring of transactions. Such structural changes are welcome and will help to make the digital currency space more secure.
The Emerging Perils
But the onus lies on how the global crypto-exchanges fix the vulnerable nodes in the vast network of cryptocurrency. As with any other area of business, the effectiveness will depend on how these exchanges, and affiliated networks comply with the guidelines and regulations.
Thanks to globalization, markets are interlinked. That ensures market access, productivity and business scalability. Nevertheless, it also exposes individuals and businesses to more risks particularly when universally the industry is marred by apparent security vulnerabilities and non-compliance. The market urgently needs broader global regulatory framework.
Then the other risk that needs immediate attention is the material shortage of skilled cryptocurrency market experts who can comprehend risks of varying degrees. Due to a serious shortage in the market, all the three financial market components- risks, volatility and uncertainty, increase dramatically.
And last but not the least, the ever-increasing number of ransomware attacks suggest that organizations’ IT security posture requires immediate attention. The execution of ransomware is possible when endpoints lack adequate safeguards to detect and mitigate ransomware attack. Endpoint security solutions along with robust Identity and Access Control mitigates the risk of data breach, ransomware and identity abuse.
Cryptocurrency space along with the larger fintech market have been in the thick of things due to financial product innovation. However, stability and growth of this sector will mainly depend on how all the stakeholders comply with the standards.