Crypto makes you ‘your own bank.’ But how secure is crypto banking?


Crypto banking refers to managing digital assets, i.e., cryptocurrency, at a financial technology firm or financial services provider. This kind of banking can include anything from holding a crypto balance, making payments, and even earning interest on your cryptocurrencies. The main advantage of using crypto banking is that it removes the traditional banking payment system from the banking process. 

The 2008 financial crisis exposed how traditional banking systems are vulnerable to economic uncertainties and challenges. When people realized that traditional banking systems are unable to secure their funds, there was a steep rise in the demand for alternative means of banking. Since then, there has been a constant growth in the use of cryptocurrencies and crypto banking. 

How To Get Free Crypto  

It is estimated that the market cap for cryptocurrency will hit $1087.7 billion by 2026. Given the tremendous potential of the cryptocurrency market, several banking and financial institutions have started to invest in cryptocurrency. 

Billions poured into crypto

A data analytics firm recently published a report that revealed that 55% of the world’s largest banks have roughly invested $3 billion in blockchain technologies and cryptocurrencies. These technologies provide more inclusive access, faster transaction times, greater security, and improved transparency. 

Therefore, more and more financial institutions and banks are investing in such technologies to stay on top of financial innovation. The US Federal Reserve and the European Central Bank are contemplating the possibilities of their respective digital currencies to keep up with the change. 

The goal of crypto banking is financial sovereignty, but that is not everything users need; they also want to make sure that their investments are safe in this new banking system. This can only be accomplished by setting up an appropriate safety net and educating users on how to securely use cryptocurrencies. 

Coinbase Banner  

Why financial institutions believe crypto banking is a safe alternative

The main problem with security in crypto banking is the definition of security itself. What institutions mean by security is very different from what cryptocurrency users understand by the term. Security, conventionally, refers to the measures and practices used to protect institutions, but it also includes the ability to retrieve stolen funds and correct mistakes.

Along with this, security for financial institutions also means being confident in sharing access with others and believing that such sharing will not cause any problems. 

Blockchain technology is usually used to create cryptocurrencies. The transactions are recorded irreversibly and immutably over “blocks” which are time-stamped. This complicated and lengthy procedure creates a secure digital ledger of cryptocurrency transactions that hackers cannot influence.

These digital transactions often require a two-factor authentication process that improves the security of every transaction. The traditional banking system, which relies on fiat money, risks being devalued, especially in the face of economic uncertainty. Crypto banking can help maintain the security of its financial infrastructure by leveraging its sovereignty and decentralized systems.

FreeBitcoin Banner  

For example: in 2020, the value of the US dollar was the lowest in decades, and hard assets (like gold) hit an all-time high. On the other hand, cryptocurrency outperformed all the other assets due to the high demand for decentralized finance (DeFi). 

Blockchain’s Greatest Security Weakness: The User

Despite multiple block ledges during crypto transactions, security is one of the biggest concerns in crypto banking. As financial institutions and businesses depend on electronic data, there is also an increased risk of financial fraud and data breaches. According to a 2020 report, 47% of Americans experienced financial identity theft in 2020, resulting in losses of about $712.4 billion.

This figure is 42% higher than the rate in 2019. This is mostly because the rapid shift to digitalization has outpaced consumer knowledge and understanding. Not being able to navigate simple security procedures, such as password protection and two-factor authentication, can dramatically increase the risk of cyber attacks.

The majority of users, for instance, are highly susceptible to phishing emails, confidence fraud, SIM swap, and even losing their devices which can expose their personal data. Accidental loss of security PINs and passwords is also one of the major reasons for unwanted losses in cryptocurrency. Given the ease of access, some customers also tend to keep their cryptocurrencies in exchange for a long period of time.

But keeping the cryptocurrencies in exchange wallets comes with an increased risk of financial fraud. Since 2011, over $1.65 billion worth of cryptocurrency has been stolen from exchange wallets, and this number is increasing rapidly. Exchange wallets are one of the most attractive targets for hackers as they have millions of dollars worth of cryptocurrency in one place. It is, essentially, a digital gold mine for threat actors.

Besides hacking and fraud, exchange wallets are also prone to troubles like mismanagement and administerial losses. A prominent example of such a case is the QuadrigaCX controversy, a Canadian cryptocurrency exchange whose owner passed away with all private keys, leading to a loss of $190 million worth of user’s money. 

Such user decisions make them more vulnerable to fraud and information breaches. This falls outside the domain of blockchain providers because, like banks, as they are also not responsible for how users manage their account information. 

How users can secure their crypto banking experience

To avoid crypto attacks and hacks, users must educate themselves on how to safely participate in cryptocurrency exchanges before investing their money. There are numerous options in terms of exchanges and digital wallets where the customer can store their digital currency. They must weigh the advantages and disadvantages of each of these options and make an informed decision.

Customers must also use a strong password for each of their accounts as cryptocurrency services are a popular target for hackers. Using a strong password, multi-factor authentication, and password rotation can help prevent data breaches. Besides this, another important measure is a careful examination of the security policies of the blockchain provider. A good provider will have features like multi-factor authentication, SSL/TLS encryption. 

Therefore, before choosing a financial services provider, the users must read the privacy and security policies of the company. The company must equip its users with adequate knowledge and tools to protect their data and money in a world full of digital frauds. The right company will maintain transparency with its customers and help them have a secure crypto banking experience.

Guest post by Ian Kane from Unbanked

Ian Kane is the Co-Founder at Unbanked, a global fin-tech platform built on blockchain. Kane has worked in technology & digital media for over 10 years with a heavy focus on business development, sales, and strategy. His diverse professional background enables him to bring unique insight and experience to every challenge he takes on.

Learn more →

Get an edge on the cryptoasset market

Access more crypto insights and context in every article as a paid member of CryptoSlate Edge.

On-chain analysis

Price snapshots

More context

Join now for $19/month

‘Rich Dad, Poor Dad’ Author Robert Kiyosaki Says Cryptocurrency Could Outlast Fiat

Robert Kiyosaki, the author of one of the top personal finance books of all time, stated that cryptocurrencies, gold, and silver, will triumph over an impending economic crash — the likes of which the world has never experienced.

2 min read →

$2 trillion asset manager Fidelity: Crypto assets will continue to gain institutional adoption

Believe it or not, a majority of 2017’s rally that took Bitcoin from $500 to $20,000 in 18 months’ time was catalyzed by retails investors — people like you or me.

3 min read →

A Wall Street veteran revealed he just bought Ethereum as DeFi sees rapid adoption

It’s been an explosive past few days for Ethereum.

3 min read →

Go to Source
Author: Ian Kane

Recommended Crypto Services, Products and Strategies:

The first thing any crypto investor needs is is a reliable and secure Crypto Wallet.  Whether you’re looking for an online wallet, hardware wallet, desktop or mobile wallet, Crypto Renegade provides you with all the Best Crypto Wallets in each category.

Best Crypto Wallets Banner

When you’re ready to buy more crypto, or exchange your coins for others, Crypto Renegade’s list of the Best Crypto Exchanges has you covered.  The Crypto Exchanges recommended here offer everything from simplicity and convenience to advanced trading platforms and profit sharing. 

Best Crypto Exchanges Banner

If you want to learn more about the methods and tools that can be used to find Great Crypto Projects, then be sure to check out Crypto Renegade’s strategy for How To Find The Best Cryptocurrency.

Crypto Strategy Banner

For those people that don’t have any money to invest right now, or just want to understand the technology a bit more, you’ll definitely want to check out Crypto Renegade’s Free Crypto Strategy and start collecting Free Coins today!

Free Crypto Banner

What do you think about cryptocurrency? Do you have any questions about it? Be sure to leave a comment below.

This site uses Akismet to reduce spam. Learn how your comment data is processed.