The ongoing battle to beat crypto thieves | FT Tech

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In March this year, hackers carried out one of the largest cryptocurrency robberies of all time. It joined a growing list of cryptocurrencies, such as the theft in August last year of more than $ 600 million in cryptocurrencies from the Poly Network program. About $ 3.2 billion in cryptocurrency was stolen in 2021, an increase of 516 percent from the previous year. One factor that drives it – hackers who take advantage of the fivefold growth last year of decentralized finance, or the DeFi area, where algorithms handle all transactions and there is no human interaction between the parties.

Approximately $ 2.2 billion of funds were stolen from DeFi projects, an increase of 1,330 percent from 2020. For digital asset holders, secure storage technology remains crucial. Holders use a unique, private key, a long password to access crypto. The keys, and therefore crypto, can be stored in online or mobile wallets, which provide quick access but offer the least secure method of holding crypto. A more secure alternative uses a device that is not connected to the internet, known as cold storage. Options include physical USB devices, disconnected computers or sophisticated hardware wallets, small USB-like devices.

But other specialized third-party services even protect customers’ cryptocurrencies by, for example, keeping private keys in vaults protected by human guards or systems that use face recognition and thumbprints. Fraud, ransom and theft rose 79 percent in dollars last year. But despite that, transactions involving illegal addresses actually represented a lowest level of only 0.15 percent of the total crypto-trading volume in 2021. And law enforcement and regulators have become better at dealing with crime involving cryptocurrencies.

But cybercriminals are increasingly using their own high-tech tools and techniques to avoid detection. One is chain hopping, hopping between different cryptocurrencies, often in quick succession. Another involves the use of tumblers or mixers, third-party services that confuse illegal agents with pure crypto before redistributing them. About 15 percent of all income from crime was routed through mixers in 2021. But mixers can increasingly be picked out. And hiding large amounts of money through mixers can be difficult for criminals. Meanwhile, regulators and enforcement agencies are increasingly cracking down on illegal transactions.

In March, for example, the UK National Crime Agency called for regulation of decentralized cryptocurrencies, while EU lawmakers supported stricter traceability rules for cryptocurrency transfers. Change is expected. But in an industry where participants are used to moving fast, it will still be the responsibility of the authorities to keep up.