Naive users, lack of regulation, fueling crypto cybercrime in India

Last month, Prime Minister Narendra Modi’s official Twitter handle was “briefly compromised” and a message was posted announcing that India had accepted crypto as legal tender.

The huge jump in the value of crypto after the pandemic and the availability of multiple wallets and exchanges has fueled massive investment in crypto. The value of some of these new cryptos, such as Dogecoin, rose 8,300% last year, more than even bitcoin. And even though the price of bitcoin is crashing again, the allure of the cryptocurrency remains. While it is still unclear how many people own crypto in India, some major crypto exchanges such as Coinswitch Kuber claim to have over 15 million users.

That said, with more people in India trading in crypto of all kinds, hackers are having a field day. According to blockchain analysis firm Chainalysis, the total value of cryptocurrencies held by illegal wallet addresses around the world rose 79% to $14 billion last year, from $7.8 billion in 2020. Crypto investors lost over $2.8 billion globally in 2021 in various crypto scams. Illegal address refers to wallets used for cyber attacks, Ponzi schemes and other scams.

Stealing crypto from wallets through phishing or defrauding people to spend on unknown or fake crypto such as Morris Coin are some of the ways crypto owners and investors have recently been targeted by scammers and hackers.

In many instances, cybercriminals use channels such as WhatsApp and Telegram to defraud young crypto owners with the promise of doubling their money. Rahul Tyagi, Co-Founder, Rahul Tyagi said, “In some cases, we have seen employees of cryptocurrency exchanges sharing databases of cryptocurrency owners with cybercriminals, who are using this information as phishing links with SMS or WhatsApp messages. Let’s start with cyber attacks.” Secure Security (formerly Lucidus), a cyber security firm.

Despite the increase in crypto investments, there is less actual knowledge about cryptocurrencies or their underlying technologies in India, as is the awareness of cyber security. “Users need to understand that unlike traditional fintech, where a formal redressal system exists in case of fraud; for cryptocurrency, if you lose control of your wallet or send cryptocurrency to an unprivileged address, there is no need to revive it. There is no way,” he said.

According to NS Nappinai, Supreme Court lawyer and founder of cyber security organization Cyber ​​Saathi Foundation, while attacks on crypto owners started a few years ago and increased during the pandemic, crypto scams have been going on for many years. “Now both are flourishing,” she said. “People don’t know about blockchain or cryptocurrencies. They get hooked easily and fall for these scams,” she said.

On their part, crypto wallets and exchanges are trying to educate users about security. Many offer features that can also reduce risks. Tyagi pointed out that most users are unaware that crypto wallets have an option called whitelisting crypto account addresses. When activated, it reduces the chances of fraud. This is an opt-in feature that allows withdrawals to only go to addresses that you have pre-specified. “Users need to explore and understand the security and privacy aspects of cryptocurrencies before investing,” he added.

Some experts also believe that the lack of regulation on crypto in India has increased the risk, as many users do not know which coins are legit and which are not. Nappinai believes that regulation “at a very basic level” will determine what is acceptable and what is criminal. “So that, from an investor’s point of view, it’s deterrent and protective. And from a law enforcement standpoint, it gives them clarity to prosecute.”

According to recent reports, India has changed its stance on crypto and is now seeking to regulate it instead of a complete ban. The government listed the Cryptocurrency and Regulation of Official Digital Currency Bill 2021 in the winter session of parliament last month, but it was not introduced.

Although scammers and cybercriminals can still be prosecuted under current laws, the regulation will encourage investors to file complaints and ensure that not only can anyone issue new coins out of the blue and initial coin offerings. You can start collecting money through Nappinai pointed out that before the Supreme Court’s decision on the appeal of the Internet and Mobile Association of India (IAMAI) in 2020, people were even afraid to file complaints for crypto crimes.

Nappinai said, “The government should decide whether to say yes or no to cryptocurrency. If you are going to say maybe or yes to certain things, be specific in terms of what you are going to allow. What if? What are the required parameters or investor protections in place for a private coin issuance,” he said.