U.S. Moves to Track Cryptocurrency Transactions
Staying safe while online remains a major concern for most Internet users.
Companies of all sizes and across all industries are taking whatever steps necessary to keep their employees safe and protect sensitive data.
One group particularly at risk are the cryptocurrency dealers who face the daily threat of malware attacks and other attempts by cyber criminals trying to steal their funds.
The quasi-anonymous nature of some cryptocurrency exchanges is also attracting attention from the authorities who suspect them of being used as a cover for funding terrorism and other unlawful activities.
Although the largest and most popular exchanges have Know Your Customer (KYC) policies, the U.S. government believes further measures are necessary to help keep track of private cryptocurrency transactions.
Against this backdrop crypto traders wanting to preserve their anonymity need additional protection.
Traders can still do much to keep their identities private through extensive use of virtual private networks (VPNs).
Background to Crypto
Cryptocurrencies have become an increasingly popular way to pay for goods and services online. The secure cryptography on which they are based makes them virtually impossible to counterfeit.
Many cryptocurrencies use blockchain technology, effectively a distributed ledger governed by a vast network of disparate computers. Transactions comprise a secure combination of public and private keys whereby a user’s wallet or account address is the public part and the contractual signature forms the private element.
Large sums of money can pass between participating parties completely free of bank fees or government scrutiny.
The first cryptocurrency was Bitcoin in 2009. Since then many hundreds of competing cryptocurrencies, or ‘altcoins’, have emerged but Bitcoin still dominates with over 50% of a market worth around $120 billion.
Trading in cryptocurrencies is fraught with risk. The life span of most altcoins is very short. Markets are extremely volatile.
Even Bitcoin is subject to huge fluctuations in value. It is also a magnet for cyber criminals.
Blockchain technology itself may be encrypted but the transaction side when dealing with exchanges and user wallets is vulnerable. Without proper shielding measures there is a real danger of hackers stealing funds.
A number of online services will exchange cryptocurrencies for cash while countries like Japan and South Korea treat them the same as any other form of currency. Successful attacks can yield many millions of dollars.
According to the blockchain intelligence agency CipherTrace, there was 3.6-fold increase in attacks against exchanges and trading platforms in 2018 amounting to losses of $1.7 billion.
Already in 2019 there have been a number of high profile cases including a 20-year-old hacker in the U.S who stole $5 million and the arrest of a British man for cryptocurrency theft worth UK Pounds 8.7 million.
Authorities Taking Steps
Exchanges trading in cryptocurrencies are unregulated. This, combined with their reputation for anonymity, holds a strong appeal for anyone wishing to hide drugs trafficking, funding for terrorism or money laundering.
Some cryptocurrencies, however, offer more privacy than others. For example, Bitcoin transactions are relatively straightforward for authorities to trace. A number of successful prosecutions have taken place.
Now, the authorities want greater powers to track the transactions of the more privacy-geared cryptocurrencies like Dash, ZCash or Monero.
The U.S. Department of Homeland Security (DoHS) has drafted a proposal aimed at prompting technology firms to develop new techniques. Such advances, it is hoped, will allow law enforcement agencies to examine blockchain transactions in forensic detail.
With so much interest in their activities, security experts recommend crypto traders take additional precautions to protect their privacy.
High on the list is the use of business-class VPN software, an established method for shielding Internet communications that applies equally well to cryptocurrency transactions.
It can also help crypto traders living in parts of the world that do not yet recognize cryptocurrencies by letting them alter their location virtually so they appear to be from a crypto-friendly country.
They can even continue to trade safely while traveling. Malware and hackers have been known to target travelers using public Wi-Fi hotspots such as in airports.
A VPN continues to protect a user’s online activity from interception by providing a barrier against such outside interferences.
In summary, trading in cryptocurrencies is a growing phenomenon. Like any form of trading it is subject to high risk and high rewards. With the stakes so high, traders can ill-afford to have their privacy compromised.
Most traders value their anonymity and are ready to adopt all measures necessary to protect their transactions from scrutiny.
A professional VPN service substantially reduces the risks by ensuring the privacy of all valuable and confidential communications, regardless of geography or remote location.