The Fifth European Money Laundering directive came into effect January 1st, which updates a fourth EU Money Laundering Directive to include crypto services. The law allows for the sale and custody of Bitcoin and other cryptocurrencies across the EU, including Germany.
The update gives banks permission to treat bitcoin, or ethereum as stocks or bonds, allowing them to also offer related fintech services to customers. Up to date, almost no German institute offered its customers virtual assets, but the new law has changed all that.
Now BaFin, the country’s financial regulator, has received more than 40 expressions of interest from banks looking for approval to operate a crypto custody business.
One of the first financial institutions to offer cryptocurrency services is Solarisbank in Berlin. The bank launched a subsidiary, Solaris Digital Assets, in December last year to drive the adoption of digital assets. Solarisbank has a full banking license and has been providing services to numerous German fintech startups.
“Digital assets will fundamentally change the financial market,” Michael Offermann, Managing Director for crypto banking activities at Solarisbank. “As soon as it becomes easier to buy and store bitcoin… we expect strong growth.”
With the blockchain industry’s value estimated to hit $23B by 2023 blockchain-based solutions and services are becoming more ubiquitous than ever. As the industry grows though, so do its risks.
While the security features inherent in blockchains make DLT resistant to attack, they do not make it immune. In fact, DLT technology is subject to a number of issues that centralized databases are not. The growing list of blockchain technology providers who have become victims of malicious hacks keeps mounting.
While industry experts continue to remind the public that DLT technology is eons beyond current data security solutions, many still believe companies should take extra precautions when safeguarding their digital assets. As more governmental and commercial sectors adopt blockchain and DLT-based technology, there’s a growing need for discussion of the risks still associated with its use.
With all the cyber threats that exist today, banks are more vulnerable than ever to becoming the next victim of malicious cyberattacks, such as credential stuffing, phishing, and ransomware. The good news is, there are proven steps banks can already take to protect their digital assets from prying eyes.
1. Assess Cloud Security
Assess their cloud security’s current state compared to security benchmarks, best practices and compliance standards.
2. Monitor Cloud Security
A vulnerability management tool can help banks automate threat detection and protect against potential threats before they become a problem.
3. Strict Access Management Policies
By only providing access permissions to employees who require it, banks can ensure their organization is well-protected from within.
4. Disaster Recovery Plans
Having a plan in place can help banks avoid data loss and allows them to minimize downtime after a disruption. This only works if data is backed up regularly and often.
5. Encrypt Data Cryptographically
Encrypting data cryptographically, and protecting the cryptographic keys to that kingdom with a secure HSM, ensures sensitive digital assets are always protected –– even if a bank’s IT structure is critically compromised.