Cryptocurrency as security

The crypto security debate The SEC has been fairly open in its ponderings about whether cryptocurrency is a security. That type of currency is not a security. He pointed out that Bitcoin came into existence as mining began as an incentive in validating a distributed platform, with no initial token offering, no pre-mined coins, and no kind of common enterprise.

Bitcoin has never sought public funds to develop its technology and it does not pass the Howey Test. Jay Clayton has endorsed remarks made by his colleague William Hinman that Ethereum is not a security. However, Gensler has warned that more than 1, cryptocurrencies are probably operating outside of US law and will have to come into regulatory compliance.

A council created by some of the major cryptocurrency exchanges — Crypto Ratings Council — seems to agree as it awarded XRP a four out of five in matching the criteria considered to be a security. Speaking at the MIT Business of Blockchain conference last year, Gensler highlighted the key distinctions that could determine whether tokens are securities.

In a nutshell, if a coin offering is designed to give investors an ownership stake, the token should be treated like a security and subject to regulation. The FCA, on the other hand, recently suggested XRP is not a security because, like Ethereum, it can be used as a means of payment exchange token and to run applications utility token. Certain crypto tokens do appear to pass the Howey Test. In level III of CCSS, multiple actors are required for the all-critical actions, advanced authentication mechanisms are employed to ensure authenticity of data, and assets are distributed geographically and organisationally.

Put together, these requirements make crypto wallets more resilient against compromise. In order to ensure the standard remains neutral and up-to-date with industry best practices, the CCSS is maintained by the CCSS Steering Committee, composed of crypto space subject matter experts. In addition to this committee one also finds the Cryptocurrency Certification Consortium C4.

This group establishes cryptocurrency standards that help ensure a balance of openness and privacy, security and usability, as well as trust and decentralisation. C4 also provides certifications so that professionals can assert their knowledge in cryptocurrencies in the same way they are able to assert other skills. The next step is to have a more generalised cryptocurrency certification and potentially a certification for CCSS compliance assessors. Although this standard has been around since and the number of crypto systems have mushroomed recently, very few organisations are claiming adherence with the CCSS when it comes to the management of crypto wallets.

In fact, it is perceived that a considerable number of businesses in this space, mainly start-ups, do not follow security best practices, and their operations do not meet minimal security standards. Typically, start-ups do not invest the proper amount of time and resources into security best practices. They do not have formal security verification standards in place and they do not exercise regular penetration tests on their systems. Put together, such characteristics make these organisations more attractive and vulnerable to cyber breaches.

While reviewing current breaches, it appears that every system that suffered a high profile cryptocurrency breach was found to be non-compliant with CCSS Level 1. In contrast, systems that are compliant with CCSS Level 2 or higher, are more likely to withstand cyberattacks that gave attackers full access to the crypto-mechanic parts of cryptocurrency.

From an IT audit perspective, testing for CCSS compliance will provide a reasonable degree of assurance that the risks related to the management crypto wallets are being minimised and mitigated. Security is invariably an important consideration, especially when it comes to financial transactions.

Money stolen from cryptocurrency wallets is usually unrecoverable. Subsequently, providing the necessary confidence that cryptocurrency wallets are managed by controls that meet industry guidelines becomes a vital issue for anyone who uses any form of cryptocurrency.

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It also raises interesting regulatory questions. Also, if I can see that a drug lord had this cryptocurrency token, and now I have it, am I contributing to the problem? Am I complicit? Do I have to delete that bitcoin? Can I advise on that? Regulation as protection. Furthermore, private analysts say that the Pentagon believes the Blockchain Technology could be used as a Cybersecurity shield. In an article by The Washington Times, analysts deem that using blockchain, the technological backbone of bitcoin, could dramatically improve security across the U.

According to Dan Boylan of The Washington Times , the key to blockchain's security is that any changes made to the database are immediately sent to all users to create a secure, established record. With copies of the data in all users' hands, the overall database remains safe even if some users are hacked.

This tamper-proof, decentralized feature has made blockchain increasingly popular beyond its original function supporting bitcoin digital transactions. Many cutting-edge finance firms, for instance, have used blockchain to expedite processes and cut costs without compromising security.

Though blockchain has several advantages over other systems, there are still a few challenges in terms of compliance, regulations, and enforcement that will need to be addressed. But progressively increasing demand and acceptance by corporations would help overcome these challenges sooner than predicted. BII Uses of Blockchain Technology Security Discussions revolving around blockchain technology have claimed that the technology can be used to initiate major changes in the security industry as a whole.

It is often argued that the technology is not only effective in driving digital currency exchange, but also to strengthen existing security solutions and address security concerns globally. Blockchain technology hopes to address multiple challenges associated with digital transactions such as double spending, data security, cross border transactions, chargebacks, frauds, and currency reproductions.

Employing blockchain shrinks the costs associated with online transactions, all while concurrently increasing legitimacy and security. Some of the proposed global security uses of blockchain technology are: The protection of sensitive records and authentication of the identity of a user, especially in the banking sector : Data manipulation can be spotted with the help of blockchain technology enabling banks to go beyond asymmetric encryption and caching in public keys.

The deployment of blockchain enables authentication of users and devices without password protection. The decentralization of the network helps in generating consensus between different parties for verification through blockchain-based SSL certificates. The distributed and decentralized nature of the network that verifies the integrity of the transactions and associated account balances makes a successful attack mathematically impossible.

Enhancing structural security of IoT devices : Certain block-less distributed ledgers are additionally enhancing structural security of IoT devices. Devices in such network settings can recognize and interact with each other in a peer-to-peer manner, without the need for a third-party authority. Accompanied with two-factor authentication, this offers unprecedented security to the network structure and makes it impossible to forge digital security certificates.

Securing internal communications: Internal communications are often prone to data leaks and cyber espionage. End-to-end encryption fails to cover the metadata, which can lead to leakage of sensitive information. In blockchain-based systems, the metadata used for communications is scattered in the distributed ledger and cannot be collected at one centralized point.