Cybersecurity Remains A Key Obstacle To Crypto Adoption

Cybersecurity remains a major hurdle to wider cryptocurrency adoption, despite growing interest from regulators, financial institutions, and investors worldwide. While the industry continues to evolve and mature, cybersecurity concerns continue to plague cryptoassets and on-chain transactions.

According to research by the Pew Center, 63% of survey respondents believe that cryptocurrencies are not safe to use. This perception is reflected in the percentage of surveyed adults who use cryptocurrency for transactional purposes, which has remained unchanged since 2021. The reasons behind these statistics are complex and multifaceted, with volatility, regulatory risks, and political tensions all contributing to investor skepticism.

However, as powerful regulators like the OCC and FDIC issue pronouncements and policies that make it easier for traditional financial institutions (TradFi) to enter the crypto space, effective cybersecurity measures will become even more crucial. By implementing robust cyber policies, firms can protect their assets and maintain customer trust.

The Banking and Payment Industries: A Highly Regulated Market

The banking and payment industries are among the most heavily regulated and supervised markets in the world. The primary reason for this is to ensure confidence in these operations and maintain market stability. Following years of patchwork enforcement efforts, including an anti-crypto regime at the SEC, there appears to be progress on effective regulation for crypto payments.

The European Union's MiCA regulation provides a starting point for entrepreneurs and regulators, while bills like the STABLE Act have received committee approval in the United States. These regulatory frameworks will mandate audits, compliance practices similar to existing TradFi policies, and real-time communication of any issues that arise.

Individual Firm Level: Adopting Proactive Cybersecurity Measures

In addition to government regulations, individual firms must adopt a proactive approach to cybersecurity. Management must ensure that adoption is done in a well-thought-out manner, as investors and customers expect firms to adapt quickly.

Employee and investor education are paramount. Firms must discuss the specifics of on-chain assets, including wallet management, private key management, and control measures. The pros and cons of each option should be evaluated based on the needs and technical expertise of individual teams.

Lower Volatility Does Not Mean Lower Risk

Investors and management professionals must understand that lower volatility does not necessarily mean lower risk. While a token or asset may have reduced headline risk, it can still pose legitimate risks such as stablecoins.

The recent ByBit hack demonstrates how sophisticated hackers can exploit internal control issues via supply chain partners, even with updated controls in place. Cybersecurity is an imperative for all organizations, and the increased adoption of cryptoassets will accelerate these conversations moving forward.