How to Secure and Future-Proof Digital Currencies

Whilst it was not so long ago that digital currencies were widely met with bemusement and scepticism, there is now a growing acceptance of this new approach to money. For the media, the consumer, and now, even governments, digital currencies are starting to be seen as a valid alternative to traditional types of currency. It seems clear that the future will see these currencies becoming integrated into our everyday lives. Indeed, in the UK alone, 3 million people [1] are making use of cryptocurrencies, and this number will undoubtedly continue to grow.

A Growing Interest

A number of governments around the globe are now actively showing an interest in how to harness the power of Central Bank Digital Currencies (CBDC) for their nations. Some have even launched their own digital counterparts to their national currencies, with China launching its digital yuan, the e-CHY last year. In the UK, meanwhile, an All-Party Parliamentary Group (APPG) is investigating ways in which a digital currency might affect the economy, whilst in the EU there is a two-year inquiry taking place into the feasibility of introducing a digital version of the Euro.

The Need to Ensure Security

However, as with any digital asset, the need to provide robust security measures is paramount. The threat of cyber crime has never been greater, as hackers target organisations of all sizes and across all industries, including public sector bodies and major utility providers. Indeed, digital currencies have already been affected by criminal activity, with a 2022 attack on Ethereum this year resulting in $600 million in Ether being stolen [2]. This theft follows similar attacks, including an infamous breach suffered by Mt. Gox currency exchange, which ultimately resulted in the company’s bankruptcy.

CBDCs (Central Bank Digital Currencies) differ from cryptocurrencies in several ways, including how they are stored, regulated and controlled. Bitcoin, for example, as a cryptocurrency is stored in a decentralized way, using Blockchain, and is not subject to financial regulation. Consumers will nevertheless require strong assurances that digital currencies are safe and secure.

Biometric Authentication Can Provide the Solution

The easiest way to offer secure access to digital currencies is to leverage biometric authentication technology. Taking the form of a fingerprint sensor built into a smart card, the technology is reliable, convenient, and easy to use, in addition to being familiar to many consumers thanks to its use in smartphones and other devices. The verification is quick and does not require the use of a PIN, preventing fraudulent misuse (only the registered user’s unique fingerprint is recognized).

Furthermore, the use of a biometric authentication chip provides the ideal protection against data theft. Rather than being stored in the cloud (where consumers have little control over where and how their sensitive personal information is stored or exposed to the risk of hacking), all of the user’s data is stored on the chip in the payment card itself.

We will discuss this in our next blog post, where we will explore how a digital Euro could be delivered.

Citations
[1] https://www.marketsmedia.com/uk-parliamentary-group-launches-for-crypto-and-digital-assets/
[2] https://www.forbes.com/sites/jonathanponciano/2022/03/29/second-biggest-crypto-hack-ever-600-million-in-ethereum-stolen-from-nft-gaming-blockchain/?sh=7e4eef6a2686

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