Cryptocurrency in Post-Pandemic: The Triumph and Escalating Threat of Fraud
Cryptocurrency is a digital asset that works as an exchange medium for any online transactions. What makes it unique is that the individual ownership records are stored in a distributed ledger of a decentralized computer database encrypted with strong cryptography, which is called a blockchain. The latter aims to create a semi-transparent transactions record, control the additional coins made, and verify coin ownership transfer.
As opposed to the central banking system, cryptocurrencies use a decentralized network with distributed ledger technology. Bitcoin, released in 2009, is the first decentralized cryptocurrency. Since then, at least 34 popular names of cryptocurrencies from all around the world are here today. Apart from bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) are the most popular cryptocurrency.
This article will discuss further the growth of cryptocurrencies, especially during the post-pandemic circumstances and the foreseeable future of bitcoin and friends.
The Victory and A New Playing Field to Follow
In the post-pandemic, where people experience a chronic economic crisis, cryptocurrencies, especially bitcoin, have gained wide popularity like never before. On December 28, Bitcoin hits a new all-time high above US$28,000. One of the main reasons behind this skyrocketing number is the uncertainty in conventional financial markets, which relied only on the central bank and backed by the government.
Cryptocurrencies have taken over the stage as investors search for alternative safe-haven assets during the crisis.
The decentralized nature of cryptocurrencies that is almost unaffected by government policy has proven itself to be a valuable form of digital gold. In 2020, Decentralized Financial (DeFi) services showed a firm rise, with the total value of cryptocurrencies-based DeFi surpassed USD10 billion.
The mainstream acceptance from the people on the other side resulted in a new playing field for cryptocurrencies, the regulation. After long being absent, authorities are now intensifying their law drafting efforts for financial technology and digital asset. The growing digitalization in the economy, especially in the post-pandemic era, will become an issue closely monitored by governments worldwide. Issues like DeFi cannot be ignored anymore, as the number of financial transactions outside traditional financial institutions increases significantly. In this effort, the European Union (EU) legislators are currently pursuing an EU-wide regulatory framework for crypto assets markets, including adopting token investment as a modern investing platform.
The Competition
As the public-darling crypto challenges the traditional financial services industry, the banks are eventually adopting fintech, especially blockchain, to streamline and modernize their operations. It is an effort of adaptation as customers need has widely shifted into the digital world. Experts predict that this sector will hold the largest market size in the global blockchain market during the upcoming years. According to a recent BIS report, 80% of the central banks worldwide are researching the pros and cons of launching their own central bank digital currency (CBDC). The European Central Bank (ECB) announced that they would take a clear decision over their Digital Euro project in the middle of 2021. The Chinese government recently indicated an acceleration of the digital currency project. They have executed various experiments among companies and citizens and even ready for worldwide release. Apart from banks and government, big tech companies are also exploring their digital currencies, such as Facebook’s Libra and another blockchain adoption by Google and Amazon.
The Threat of Fraud
While 2020 marks the great potentials for investment in cryptocurrencies, the threat of fraud cannot be avoided. Cyber frauds, including fake crypto investment platforms, fake crypto wallet scams, and a new form of malware, are prevalent in the market, targeting nonexpert crypto enthusiasts. According to a blockchain analytics firm, CipherTrace, attacks on decentralized finance (DeFi) firms reach 21% of the total online theft volume in 2020. Furthermore, in its reports on financial threats for 2021, cybersecurity specialist Kaspersky also foresees a potential rise in crypto crime following the economic crisis due to the pandemic. The report mentioned that cryptocurrencies, especially Bitcoin, will become more attractive as countries’ economics plunged and remain uncertain due to the never-ending battle to a pandemic.
During this year only, global crypto exchanges, including KuCoin and Eterbase, suffered a high-profile hack. Hackers stole at least [$280 million of Seychelles-based KuCoin](https://www.coindesk.com/kucoin-recovering-from-hack-resumes-deposit-withdrawal-services-for-all-tokens#:~:text=KuCoin%2C the Singapore-headquartered digital,all tokens as of Sunday.), while Eterbase lost $5.4 million to the attackers. Additionally, in August, cryptocurrency investment platforms, namely 2gether, suffered a €1.2 million hack. Meanwhile, in July, a crypto-friendly neo-bank, Cashaa, lost Bitcoin worth $3.1 million due to cyberattacks. The Cashaa hack was started in India; it has forced the bank to halt all transactions for 24 hours.
There is a strong indication that the COVID-19 pandemic would mark the extreme acceleration point for cryptocurrencies to win the hearts of many and be widely used like it’s never before. The minimum to no influence from the government policy and the maximum transparency of transactions and distribution empowered this digital asset to become a compelling alternative to conventional financial instruments. The limited amount made it the new “gold” that shines bright in the investors’ eyes. However, as it gets mainstream, the scenario might change from the playmaker called regulators. Not to mention the intense competition of digital currencies, in general, which participated by both states (central banks) and private institutions (tech companies).
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Contributor: Rachmadita Kusumastiti
