Traditional Cryptocurrency Custodians Increase Security
As the largest cryptocurrency, Bitcoin’s price continues to soar to unprecedented levels, institutional investors are paying close attention to digital assets.
The latest results from a Bank of America-Merrill Lynch survey conducted between December 4-10 show that around 15% of fund managers with $534 billion under management believe that Bitcoin is the third-busiest transaction. Additionally, a recent Fidelity survey found that nearly 36% of respondents, or 774 institutional investors, own assets in cryptocurrencies.
However, Bitcoin continues to capture the attention of professional investors worldwide. Security measures, along with insurance guarantees, are becoming more critical than ever. This, especially, has become the case for more traditional custodians and banks that add digital assets support.
Offline security is a must to safeguard digital assets
According to the report by KPMG shows that the number one key action for cryptocurrency holders is to enable the use of next-generation security and resilience. The report notes that this involves incorporating major cryptographic techniques, including multi-signature, sharding, multi-part computing, and dedicated physical hardware. In other words, online and offline security measures are required to safeguard digital assets.
Lior Lamesh, CEO and co-founder of GK8, an Israeli blockchain cybersecurity company, said that when it comes to traditional institutions with large amounts of money and reputations to manage, offline security procedures are fundamental for the protection of digital assets.
Since blockchain is an immutable distributed ledger, organizations must do everything possible to prevent hacking. When it comes to online wallets, it is easy to understand why these are vulnerable. They always have a connection to the Internet. However, this is not it’s safe enough for banks and traditional custodians.
Is offline protection enough?
While offline security procedures are necessary to safeguard billions of dollars in digital assets from cyber threats, some challenges are worth acknowledging.
For example, offline storage facilities are inherently less liquid than online solutions. KPMG’s report notes that digital assets typically use a public key infrastructure (PKI). However, PKI has posed problems in the past when it comes to disaster recovery. The KPMG report indicates the exacerbation of these problems in crypto operations. They depend on the availability of public and private keys to transfer assets.
The report further states that organizations managing key pairs will have to develop disaster recovery plans to secure private keys within each tier of storage, for each digital asset type. However, traditional techniques may fall short, given their physical dependency.
Despite the concerns, traditional custodians and banks are well aware that security is essential in supporting digital assets.
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