Safety, both for individuals and assets, holds paramount importance within companies. With a growing number of businesses expanding their portfolios to encompass intangibles like cryptocurrencies, it becomes imperative to devise comprehensive strategies for their protection. The intrinsic digital and intangible attributes of cryptocurrencies render them susceptible to fraud and theft. Moreover, the absence of a track-and-trace mechanism in case of loss amplifies the challenges associated with their safeguarding. In such instances, the sole recourse for asset recovery rests upon the goodwill of the recipient. But we must acknowledge that fraudsters, devoid of such principles, are unlikely to extend such courtesy.
From our observations, these five strategies are helpful to safeguard your assets to a degree,
1. Cold Storage Wallets:
Using cold storage wallets, which are not connected to the internet, to store the majority of your crypto holdings is essential. Hardware wallets are preferred by most. Cold storage provides an extra layer of security because it's less vulnerable to online threats like hacking and phishing.
Some examples are Ledgers and Trezor devices. These devices password protect your assets and you can only move assets in and out with a designated device.
2. Multi-auth Wallets:
Introducing multi-authentication or multi-party wallets into your company's crypto asset management strategy is a highly effective means of bolstering asset security. This approach necessitates the involvement of multiple private keys to validate transactions. By establishing a protocol where a minimum of two or more individuals within your organization must provide their approval for transactions, the risk of unauthorized access is significantly reduced. Should this approach appear impractical for your organization's needs, an alternative option is to define transaction tiers that require additional user endorsements before they are digitally authorized.
Notable examples of multi-signatory wallets include Gnosis and Copper. Copper employs a walled-garden functionality that mandates additional security checks prior to designating a new wallet ID as secure for withdrawals. This process includes obtaining approvals from parties other than the initiator of the request, adding an extra layer of scrutiny to any withdrawal address addition requests.
3. Secure Access Controls:
It's self-evident, much like the need to secure your bank accounts and other assets, that minimizing access should be a priority. Enforce stringent access controls and restrict the number of employees with permissions to crypto assets.
Given that information can be readily obtained from the public blockchain, implementing these access controls can be accomplished with relative ease
Use strong, unique passwords for wallets and exchanges, and consider using password managers such as Lastpass or 1password. Enable two-factor authentication (2FA) wherever possible to add an extra layer of security to accounts.
4. Regular Security Audits:
Apart from the above, conducting regular security audits of your crypto storage systems and protocols can help identify vulnerabilities and weaknesses that need addressing. Stay updated with security best practices and follow the latest security recommendations from wallet and exchange providers. Update wallet software such as used in Ledgers with the latest versions.
5. Employee Training and Awareness:
Educate your employees on the potential risks linked to cryptocurrencies and emphasize the significance of security. Establish an internal policy that delineates procedures for handling crypto assets, including guidelines for reporting suspicious activities and adhering to security protocols.
Recent events serve as a stark reminder; for instance, when we received an email claiming to be from Metamask requesting a wallet update, a quick Google search immediately exposed it as a fraudulent attempt
Additionally, consider the following best practices:
Diversification: Avoid placing all your crypto assets in one wallet or exchange. Spread your holdings across multiple wallets and platforms to minimize the impact of a potential breach.
Regular Backups: Ensure that you have secure backups of wallet keys and recovery phrases in multiple locations, preferably in separate physical and digital formats.
Incident Response Plan: Develop a clear incident response plan that outlines steps to take in case of a security breach. This plan should include notifying relevant authorities, partners, and customers, if necessary.
Insurance: Investigate the availability of crypto insurance to protect against theft or loss of assets. Though this was largely unavailable a few years
Stay Informed: Stay updated on the latest security threats and trends in the cryptocurrency space. Join industry forums and networks to learn from others' experiences.
It's disheartening to witness the proliferation of scams within the crypto space, which has adversely impacted numerous individuals and businesses. These losses are not only financially burdensome but also inflict psychological stress on the victims. By adopting these strategies and adopting a vigilant stance towards security, your company can mitigate the risks associated with the custody and management of crypto assets.
Contact us, your Crypto accountant, for a discreet consultation on streamlining your crypto treasury operations or establishing an efficient outsourced finance solution. Let's supercharge your financial success together!
Notes and references
1. Metamask policies and FAQs - https://support.metamask.io/hc/en-us/articles/12683145255835-I-received-an-email-claiming-to-be-from-MetaMask-Is-it-legit-
2. All pictures used in our blog are from pexels.com are are licensed under Creative commons for commercial use