The SEC Combating Cryptocurrency Fraud with New Hires

 Image of the US Securities and exchange commissions building.
The SEC plans to combat cryptocurrency fraud by hiring 20 new employees in the near future.

On Tuesday, the Securities and Exchange Commission (SEC) announced the creation of twenty new positions for specialists. These newly-created jobs will be responsible for protecting crypto investors around the nation against cyber-attacks and scams. The SEC combating cryptocurrency fraud should ensure the market’s quality and safety and inspire more faith in investors.

According to the Commission’s press release, these new positions will focus on and investigate these 6 domains:

  1. Cryptocurrency asset offerings
  2. Asset exchanges
  3. Asset lending and staking
  4. DeFi Platforms
  5. NFTs
  6. Stablecoin

The SEC made this move in response to a slew of cybersecurity threats, fraud, and what Ohio senator Sherrod Brown (D) calls “outright theft”, which has occurred because the public and investors are not familiar with the blockchain products they are investing in.

Because of the unfamiliarity, many bad actors have appeared on the market. These malicious entities offer fraudulent products, and they deceive consumers and investors. This also lowers future investors’ confidence in cryptocurrency and blockchain products and technology.

20 New Positions to Assist the Crypto Assets and Cyber Unit

In the May 3rd press release, the SEC announced that they would allocate 20 positions to the Crypto Assets and Cyber Unit immediately. That will see the number of positions rising to 50 dedicated specialists.

The former Cyber Unit will become the Crypto Assets and Cyber Unit, aiming to search and prosecute cases against malicious entities that endanger crypto investors and markets.

The SEC explains that the expansion’s goal is to bolster the current unit. This unit will also become a forefront to protect investors and markets against critical challenges.

The decision doesn’t come in unanimously inside the commission. Commissioner Hester Peirce (R) voiced her opinion that the SEC should focus on enabling better regulation to relieve the market instead of enforcement.

Opponents have issues with “overregulation,” so the change hasn’t reached bi-partisan support. Still, this move will likely not get overturned this close to November’s midterm elections.

Screenshot of a tweet from Hester Peirce
The new regulation for combating cryptocurrency fraud has failed to receive bipartisan support.

New Age of Cryptocurrency Monitoring

Generally, better regulation and oversight in markets and investments are good. Yet, this issue isn’t as clear to crypto regulators. Critics of the new advancements in enforcement speculate that reducing decentralization and enforcing more regulation will reduce the technology’s current appeal.

The new concept of decentralized networks based on cryptocurrency and the blockchain (dubbed Web3) might not be compatible with the new enforcement types.

Opposite to that position are real and measured cybersecurity threats. The number of scams targeting this nascent market is also increasing. These can severely reduce the trust an average user would have in the technology, possibly stopping the market altogether.

The United States has established these new rules. The Central Bank Digital Currency (CBDC) is also issued in nine countries, including eight Caribbean nations and Nigeria. At that, the question arises: is the cure worse than the malady? Would these developments be beneficial to everyone in the future?

Cryptocurrency Cybersecurity Issues

The emerging market understandably has issues with less-than-honorable ways to do business. Similarly, the blockchain also brought threats and risks, unlike anything the digital age has seen. 

Early February 2022, the DOJ issued a statement that they had arrested people for laundering and stealing $4.5 billion in crypto. This is the largest case of this sort now, and it is also the largest theft in history. We deduce that the market needs protection and supervision, especially since these crimes may rise in the future.

Currently, crypto cybersecurity risks come from 3 main sources, but multiple new ones keep popping up every month:

  1. Cryptojacking
  2. Phishing
  3. Blockchain vulnerability

Some of these, such as phishing and ransomware, are common cybersecurity issues, and they have existing tools to combat them. Others are new and harder to detect, like the blockchain’s vulnerability and the bad actors within it.

Companies, governments, and users should develop new tools to ensure the safe use of everything the blockchain offers.

 Image of a lock thrown on loose keyboard keys.
New threats are emerging and might compromise the new cryptocurrency market.

Cryptojacking

Cryptojacking is malware that isn’t directly harmful to the victim’s device but can allow the malicious actor to overtake that device. After that, the cybercriminal can use the victim’s resources to mine crypto. 

In such ways, cryptomining pools get made from completely unsuspecting victims of malware. That also brings profits to the malware’s owner and externalizes the cost of power and processors.

The biggest problem with cryptojacking is that it is often hard to detect. It might not even be malware in the strict sense of the word. Some apps and browser extensions also discreetly ask the user if they agree to the attack.

Cryptojacking has become one of the biggest issues in the cryptocurrency market, especially with the  Google attack from last year that compromised more than two billion Chrome users.

Phishing

Phishing is a widespread hacking tactic where cyber criminals make malicious web places look like trustworthy ones. That also tricks the visitor into downloading malicious files or providing personal information. The victim believes they are disclosing information to a legitimate location all the time.

A prevalent phishing attack happened last year with the UC San Diego Health System breach. This breach leaked the private information of patients inside the network. These attacks are hard to combat because, in essence, they rely on human error, not mistakes in digital cybersecurity.

Scammers can also use phishing in cryptocurrency fraud. The victim will believe they are on a legitimate exchange or entered a mining pool with their equipment. Instead, the operation would be a scam, so the victim loses their resources without legal recourse.

Malicious Miners

The final issue, which the proposed the SEC regulations against cryptocurrency fraud can probably resolve, are blockchain networks that are majority malicious. That’s when malicious miners make up more than 51% of the network.

In such a case, said majority can falsify the information inside the network and change it without the chain removing the false information. In a sense, they would affirm their hack as the new reality for the system.

The now dubbed 51% attack is less likely to form in prevalent cryptocurrency networks like Bitcoin, Litecoin, or Ethereum. Yet, it can be devastating for young or obscure crypto and ICO.

Protect Yourself from Cryptocurrency Fraud

Since the crypto market is still emerging, issues will likely happen. The situation with the SEC has also shown us that it isn’t easy to remedy most security issues. 

Cryptocurrency fraud is a prevalent issue nowadays, and crypto investors should always be mindful of the cybersecurity risks they face on exchanges. 

We’ll have to see if the SEC’s new unit will succeed in the fight against cryptocurrency fraud without affecting the decentralized aspect of the blockchain.

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