That cryptocurrency you just bought is as vulnerable to hackers as your smartphone or any other digital device, security experts are warning.
The European Supervisory Authorities (ESA) for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) had also earlier issued a pan-EU warning to consumers regarding investing in risks of buying Virtual Currencies (VCs).
Collectively referred to as ESAs, the regulators are concerned that an increasing number of consumers are buying VCs like bitcoin, Ethereum, and Litecoin and are unaware of the risks involved. Most buyers believe virtual currencies are a secure way of making payments — without really understanding how they work.
VCs are unregulated and subject to extreme price volatility and have shown clear signs of a pricing bubble and consumers buying VCs should be aware that there is a high risk that they will lose a large amount, or even all, of the money, invested.
Some VC exchanges have been subject to severe operational problems in the past. During these disruptions, consumers have been unable to buy and sell VCs when they wanted to and have suffered losses due to price fluctuations during the period of disruption.
Also, criminals can break into crypto exchanges, drain crypto wallets and infect individual computers with malware that steals cryptocurrency. Moreover, “VCs and exchanges where consumers can trade are not regulated under EU law, which means that consumers buying VCs do not benefit from any protection associated with regulated financial services. For example, if a VC exchange goes out of business or consumers have their money stolen because their VC account is subject to a cyber-attack; there is no EU law that would cover their losses,” wrote the ESA in the warning note.
A recent report from ThreatMetrix cautions: “Cryptocurrency has moved from being the playground of the criminal underworld to be a prime target for attacks on legitimate transactions.”
An analysis of the most common cyber crimes involving Ethereum by Chainalysis, a provider of risk management software for virtual currencies, found that phishing is currently creating the most losses. Phishing is responsible for more than 50 percent of all cybercrime revenue — estimated at more than $225 million — generated from Ethereum in 2017, the company reported in a blog post last year.