An eye on encryption.. How secure are encrypted banking transactions? 

Crypto banking refers to the management of digital assets, i.e. cryptocurrency, in a financial technology company or financial services provider.

This type of banking can include anything, from maintaining a crypto balance or making payments, to earning interest on your cryptocurrency.

The main advantage of using cryptocurrencies is that they eliminate the traditional bank payment system from the banking process.

The financial crisis of 2008 revealed how traditional banking systems have become subject to economic uncertainties and challenges.

When people realized that traditional banking systems were unable to secure their money, there was a sharp rise in the demand for alternative banking methods.

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Since then, there has been a continuous growth in the use of cryptocurrencies and crypto banking.

While it is estimated that the market value of cryptocurrencies will reach $ 1,087.7 billion by 2026 .

In conjunction with the entry of many banking and financial institutions, the investment sector in cryptocurrencies, given the huge potential of the market for these currencies.

Influx of billions in cryptocurrency

A data analytics firm recently published a report revealing that 55 percent of the world's largest banks have invested nearly $3 billion in cryptocurrency blockchain technologies .

These technologies provide more comprehensive access, faster transactions, greater security, and better transparency.

So 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 also considering the possibilities of their digital currencies to keep pace with change.

The goal of crypto banking is to achieve the element of financial sovereignty, but that is not all that users need, they also need to make sure that their investments are safe in this new banking system.

This can only be achieved by creating a proper safety net, and educating users on how to safely use cryptocurrencies.

Why do financial institutions think crypto banking is a safe alternative?

The main problem with the security of crypto banking is the definition of security itself. What institutions mean by security as a term, is quite different from what users of cryptocurrency understand.

Security traditionally refers to the procedures and practices used to protect organizations, but it also includes the ability to recover stolen funds and correct mistakes.

It also means that financial institutions can provide confidence in sharing access with others, and the conviction that such sharing will not cause any problems.

Conversely, in the blockchain technology that is commonly used to create cryptocurrencies , transactions are recorded irreversibly and immutably on “blocks” that are time-stamped.

This complex and lengthy procedure also creates a secure digital distributed record of cryptocurrency transactions, which hackers cannot influence.

These digital transactions often require a two-factor authentication process that improves the security of each transaction.

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On the other hand, the traditional banking system, which relies on paper money, risks devaluing its value, especially in the face of economic uncertainty.

Crypto banking can help maintain the security of its financial infrastructure, by taking advantage of its sovereignty and decentralized systems.

In 2020 , for example, the value of the US dollar was the lowest in decades, and fixed assets (such as gold) reached all-time highs.

In contrast , the encrypted currency outperformed all other assets, due to the high demand for decentralized financing de - Fi ( DeFi ).

User and Biggest Security Vulnerabilities in Blockchain

Security is one of the biggest concerns in crypto banking, as financial institutions and businesses rely on electronic data, so there is an increased risk of financial fraud and data breaches.

It has been 47% of Americans to identity theft in the financial year 2020, according to media reports, resulting in losses of about 712.4 billion.

This number is 42% higher than the average recorded in 2019 , mostly because the rapid shift to digitization has outpaced consumer knowledge and understanding.

The inability to navigate simple security measures, such as password protection and two-factor authentication, can greatly increase the risk of cyberattacks.

The majority of users are also highly vulnerable to fraudulent emails, trust fraud, SIM swapping , and even losing their devices which can reveal their personal data.

Accidental loss of PINs and passwords is one of the main causes of unwanted losses in cryptocurrencies.

Some clients may also be tempted to hold their cryptocurrency on the exchange for a long period of time, given the ease of access.

Also, holding cryptocurrencies in exchange wallets may come with an increased risk of financial fraud.

Over $ 1.65 billion worth of cryptocurrency has been stolen from exchange wallets since 2011 , and that number is rapidly increase sing.

Exchange wallets are one of the most attractive targets for hackers, with millions of dollars worth of cryptocurrency in one place, they constitute a digital goldmine for threat actors.

It is also noted that exchange wallets, besides piracy and fraud, are vulnerable to problems such as mismanagement and administrative losses.

A notable example of such a case Quadraga C X QuadrigaCX , a Canadian currency exchange owner died encrypted with all keys, resulting in a loss worth 190 million dollars from the user funds.

These user decisions may increase their exposure to fraud and information breach, as this is outside the scope of Blockchain providers , because just like banks, they are not responsible for how users manage their account information.

How can users secure their encrypted banking experience?

Users should educate themselves on how to safely participate in cryptocurrency exchanges, before investing their money, in order to avoid hack attacks.

As there are many options in terms of exchanges and digital wallets, which enables the customer to store his digital currency.

The advantages and disadvantages of each of these options must be weighed, and an informed decision must be made.

Furthermore, customers must use a strong password for each of their accounts, as cryptocurrency services are a common target for hackers.

While using a strong password, multi-factor authentication, and changing the password periodically, can help prevent data breaches.

Another important measure is a close examination of the security policies of a blockchain provider , as a good provider will have features such as multi-factor authentication and SSL / TLS encryption .

For this reason, users should read the company's privacy and security policies, before choosing a financial services provider.

The company must also provide its users with the knowledge, and tools to protect their data and money, in a world riddled with digital fraud.

While the right company will maintain transparency with its customers, help them have a secure crypto banking experience.