TECHNOLOGY

Cryptocurrency Concerns: Who Has the Digital Storage Keys?

Do you have crypto? Make sure you own and access it in a secure digital stronghold.

Self-custody of your crypto keys and management of your digital assets can help prevent digital bankruptcy or loss through theft, cryptocurrency storage provider warns CompoSecure.

Cryptocurrency has been an increasingly well-known term since Bitcoin emerged in 2009. Since then, countless cryptocurrencies have joined the digital asset market and despite the recent drop in valuations, the market value of cryptocurrency has skyrocketed.

Market watchers valued the global cryptocurrency market size at $1.49 billion in 2020. Some predict it will reach $4.94 billion by 2030, with a compound annual growth rate (CAGR) of 12.8 percent from 2021 to 2030.

According to Vantage Market Research, the cryptocurrency market represents the beginning of a new phase of technology-driven markets that can challenge traditional market strategies, longstanding practices in corporate organizations and determined regulatory perspectives.

Control over cryptography

Cryptocurrencies have the innovative potential to give people access to a global payment system in which participation is blocked only by access to technology. It could replace traditional standards based on having a bank account or credit history.

However, buying and selling cryptocurrencies and using digital currencies to pay for products in the physical world is not the same as opening a bank account and depositing a salary. An announcement from Coinbase may have dispelled the elephant in the crypto storage space.

Coinbase is an app that allows people to buy and sell different cryptocurrencies – Bitcoin, Ethereum, Litecoin and many others – and allows users to convert one cryptocurrency to another. Users can also send and receive cryptocurrency to and from other people.

in his Submit 10-Q last month, Coinbase announced that it would have the right to hold crypto assets of its retail users as the property of the bankrupt estate, if the company filed for bankruptcy.

So, what about crypto providers and digital storage centers that hold your cryptocurrency?

That disclosure drives awareness and highlights the importance of self-determination, according to Adam Lowe, chief innovation officer of CompoSecure and creator of Arculus.

“As cryptocurrency becomes more and more mainstream, many people are jumping on their feet first and not doing proper research and educating themselves. It is important that users know how their cryptocurrency works, who owns it and what control they have over their digital assets,” Lowe told the E-Commerce Times.

Crypto Cold Storage Solution

CompoSecure is a pioneer in the premium payment card industry. The company has also developed and delivered an emerging cryptocurrency and digital asset storage and security solution that it calls Arculus.

The new cold storage wallet approach to securing crypto uses the name of the ancient Roman god. Arculus was considered the guardian of vaults and safes that the Romans relied on to ensure the protection of their cherished possessions.

The company applies that same nomenclature today. Arculus is the modern day incarnation of this watchful deity, ensuring the safe, strong security of critical digital assets and identity.

ADVERTISEMENT

Think of this storage solution as a token, just like the physical device some people rely on to keep their computers under lock and key. For crypto, ownership is directly linked to the owner’s private key.

For example, if you buy crypto through an exchange and leave it there, you trust the exchange to give you your digital assets when you ask. But since they retain ownership of the private keys, the exchange has full control over compliance, Lowe warned.

“That’s why self-custody wallets are important. By storing your private keys in a self-managed wallet, such as a hardware wallet, only you have full ownership and control over your cryptocurrency and other digital assets. As we say, your keys, your crypto,” he explained.

Hassle-free ownership and access

Dealing with digital assets is not the same as going to your local bank. Crypto security works very differently. When a traditional bank is insured by the Federal Deposit Insurance Corporation (FDIC), deposits are protected up to at least $250,000 per depositor if the bank is robbed, defaulted, or goes bankrupt.

Not so with cryptocurrencies. Those digital assets belong to an unregulated asset class that does not have the safeguards of traditional fiat currency. Crypto is not currently subject to FDIC protection, Lowe noted.

“From now on, if your cryptocurrency gets hacked, it’s gone. This is the main reason why it is important to properly secure and protect your digital assets offline,” he advised.

There is no holistic cryptocurrency regulation. Therefore, cryptocurrency is a highly volatile asset.

“The Biden administration is discussing US regulations. While we expect a move in that direction, it may take some time for generally accepted regulations to take effect,” he added.

Holding the right card

CompoSecure’s recently launched hardware wallet for storage enables consumers to self-custodian and manage all their digital assets in one offline place. This approach only gives the user ownership of the crypto keys.

Arculus Wallet product capabilities now include NFT support. (Image Credit: Business Wire)

The company’s innovative solution is the Arculus Key Card which uses a CC EAL6+ secure element to encrypt and store your digital keys. It’s not connected to anything. If you lose it or it is stolen, no one else can use it.

When a crypto owner makes a transaction in the Arculus Wallet app, the user has to tap the key card against his or her mobile device. This is an important security step in the three-factor authentication that Arculus uses to keep crypto keys safe.

The card communicates with the wallet app to authorize a secure Near Field Communication (NFC). It includes no Bluetooth, no Wi-Fi, no USB and no cords.

CompoSecure announced the same approach on Tuesday for non-fungible token (NFT) support.

Cashing in on Crypto

Dealing with cryptocurrency issues can be a lot like a rabbit hole. The more you dig, the further you fall into a financial abyss. To ease the transition to crypto banking, we asked Adam Lowe to shed some light on the subject.

Ecommerce Times: Do Crypto Platforms Offer Digital Protection?

Adam Lowe: Some cryptocurrency platforms do offer types of cyber or crime insurance, but like most insurance policies there are limitations and loopholes.

So, do consumers need to understand the basic guidelines for owning digital assets and who owns the keys to the crypto?

Lowe: The most important thing to understand is who owns your keys and owns your cryptocurrency. Consumers should educate themselves about custodial versus non-custodial assets.

In addition, using exchanges or hot wallets that use a continuous internet connection keeps the door open for threats of hacking and theft.

It is also vital to use multi-factor authentication (MFA). Three-factor authentication is extremely valuable because it ideally looks at something that you are, such as a biometric, which could be a fingerprint or facial recognition. It requires something you know, such as a personal identification number or PIN.

Finally, it needs something you have, like our Arculus Key Card. This extra security step is crucial to ensure that only you have access to your assets.

How does self-determination work?

Lowe: That means you own your private keys. The keys give access to full control over one’s digital assets rather than relying on a third party to be the custodian and arbiter of your digital assets.

Using a hardware wallet, such as Arculus, provides self-preservation, as only you can access your private keys and manage your digital assets.

ADVERTISEMENT

What makes this method different from other custodial arrangements with crypto brokers?

Lowe: Crypto brokers and centralized exchanges are third-party custodians. They control and access your private keys to buy, move and invest your digital assets accordingly. Non-custodial agreements hand over the keys and limit the layers of protection to the end user.

How can self-preservation protect consumers from online hackers and preserve their digital assets even if they go bankrupt?

Lowe: With self-keeping, no one can access your digital assets without your permission. This provides the necessary level of protection against hacks.

When it comes to an individual user going bankrupt, cryptocurrency is not considered income, but rather property. Bankruptcy law is complex and very factually specific, so I can’t give you advice on what can happen to cryptocurrency in a user’s bankruptcy.

Is crypto investing for everyone or just for those who can afford to lose?

Lowe: Cryptocurrency is currently being adopted faster than the internet. It’s going mainstream. For some, it is their first investment venture. But as with any investment, there is a risk of loss. As long as people understand the lack of regulation and high volatility, they can invest based on their comfort level.

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button