Decentralised Finance Still an Area of Concern

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cryptocurrency crime drop
  • Losses from cryptocurrency theft, hacks and fraud depleted by 57% to $1.9bn
  • Market participants enhanced the security systems and ensured robust regulations are being followed
  • However, certain irregularities continue to grow in the De-Fi (decentralised finance) space.

Mistakes, Breaches, Crimes, Unknown errors are various aspects which knowingly or unknowingly are detrimental to the overall health of the market and economy. However, these situations cannot be eliminated but efforts are made globally to reduce and impose strong regulations against crimes. 

Cryptocurrency Prevention Measures Against Criminal Actions

A record, $4.5bn was siphoned off from the cryptocurrency markets in 2019. This garnered huge attention across the globe and federal authorities demanded strict action to prevent any kind of loopholes.

Cryptocurrencies have built on scrutiny and interest since institutional investors have heavily adopted digital assets, especially bitcoins. This was reflected in the prices of Bitcoins which propelled to $42,000 earlier in the month.

Maturity of financial institutions and adoption of strong security measures have prevented thefts and hacks against centralised institutions

Implementation and monitoring of strict regulations have restricted centralised fraud schemes. In order to prevent any repeat of the 2017 fiasco, governments and financial organisations are very sensitive towards any unexplainable trends in prices.

Hence, the performances are strictly monitored and efforts are made to ensure a regular and smooth performance to prevent the interests of the investors and general public.

Are Decentralized Finances a Breeding ground for suspicious activities?

De-Fi is a platform allowing investors to borrow or lend funds from others and work on other activities such as trading of cryptocurrencies, insure against risks, speculation on price movements etc. However, this mode does not rely on central financial intermediaries such as exchanges, brokers or banks and utilises smart contracts on block-chains.

However, this aspect could prove to be a drawback as certain suspicious activities have been spotted. In the past year, the total amount of loans on De-Fi platforms has climbed from $4bn to $25bn. This is an increase of more than 500% in a very short span of time.

De-Fi runs on open infrastructure with algorithms that set rates in real time, based on existing demand and supply. Since this is an open place, anyone can get their hands on it and perhaps tamper the facilities.

These platforms enjoy multiple exemptions including traditional regulatory enforcement regimes which centralises exchanges, money service business and banks. However, these benefits could be tampered and taken undue advantage off and hence needs to be strictly monitored. 

Additionally, these platforms do not have to perform KYC or AML (Anti-Money Laundering) requirements. Thus, it can be a breeding ground for various kinds of grey activities.

Thus, criminal activities can take various forms such as dark markets, hacking or ransomware actors. There is a possibility that such activities could unknowingly be a part of the organised sector and thus flow into the white market. Such activities have to be prevented and the sources of funding have to be monitored and approved without any kind of suspicious activities.

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