Cryptocurrencies have become a hot topic over the past several years, with the global blockchain market expected to hit approximately $23 billion by 2023 and the total market size for cryptocurrencies expected to hit more than $1 billion by 2026. This surging market is a hotbed for cybercrime, however, with the Massachusetts Institute of Technology (MIT) Technology Review finding that nearly $3 billion was laundered through cryptocurrency exchanges in 2019 alone, up from $1 billion the year prior.
User authentication and onboarding are key to preventing this wave of fraud, but cryptocurrency exchanges that leverage these are still in the minority. Fifty-six percent of cryptocurrency exchanges around the world have no such onboarding solutions in place, a critical security gap that could potentially lead to more cryptocurrency cybercrimes in the future. Background checks, international sanctions lists, verification of government-issued IDs and even phone interviews will be key to keeping this growing industry safe.
The June Digital Onboarding Tracker® explores the latest in the world of digital onboarding, including the fraud problems faced by cryptocurrency exchanges, the artificial intelligence (AI)-based systems many are deploying in the face on regulatory pressure, and new blockchain-based security systems that could be a game changer for the industry.
Developments From Around the World of Digital Onboarding
Cryptocurrency exchanges are seeing nothing less than a cybercrime crisis, and individual investors are suffering the costs. Almost 7,000 individuals reported losses of more than $80 million in investment scams since October with a median loss per victim of $1,900, and losses have increased by 1,000 percent since the year prior. Most victims of cryptocurrency investment scams are young, with individuals aged 20 to 49 more than five times as likely to be victimized by these scams.
In light of these cybersecurity weaknesses, federal authorities are stepping in to try to get cryptocurrency exchanges’ act together. The Securities and Exchange Commission (SEC) announced that it would begin working with Congress to crack down on cryptocurrency cybercrime, but it could face some challenges in this project. The SEC only spends up to 17 percent, or $325 million, on technology annually, far less than many of the corporations and exchanges it intends to police.
Some cryptocurrency exchanges are taking the initiative to improve their onboarding systems rather than wait for an oversight crackdown. BITPOINT LATAM this month announced a partnership with Acuant to integrate the latter’s Acuant GO solution, for example, which is currently used for nearly 2 billion transactions annually. The system leverages AI-enabled biometrics and document verification, both of which are complemented by a human security team to double-check flagged applications.
For more on these and other digital onboarding news items, download this month’s Tracker.
Improving Cryptocurrency Exchanges’ Onboarding Procedures Through AI
Cryptocurrency exchanges are facing new waves of fraud attempts as digital engagement soars, with experts worrying that many of their current AI-based onboarding systems could potentially be circumvented by fraudsters.
In this month’s Feature Story, PYMNTS talked with Konstantin Anissimov, executive director of cryptocurrency exchange CEX.io, about how new blockchain-based security systems can help prevent social engineering attacks.
Deep Dive: How Cryptocurrency Exchanges Can Reduce Fraud Through Onboarding
Cryptocurrencies are notoriously volatile, but they have recently surged in value as their public interest grows. This sharp increase in worth as well as cryptocurrencies’ inherent anonymous nature has made them hotbeds for fraud, and cryptocurrency exchanges are often reluctant to include user authentication in their onboarding procedures.
This month’s Deep Dive explores the consequences of subpar onboarding in the cryptocurrency world, and how these exchanges can step up their authentication game.
About the Tracker
The Digital Onboarding Tracker®, done in collaboration with Acuant, is your go-to monthly resource for updates on trends and changes in digital onboarding.