With bitcoin reaching a new record, it shows more investors are getting swept up in the dream of “being their own bank” via tokens that can be transferred instantly and anonymously outside the traditional financial system. Yet at the same time, there seems to be too little awareness of the cost of being your own bank security guard in a cashless world.
A recent double-digit rise in crypto-exchange hacks and a wave of brazen crypto-executive kidnapping attempts — with the latest taking place in broad daylight on the streets of Paris — has put the industry on edge and ramped up interest in security, with 23 such attacks recorded this year by one database (up from six over the same period last year), Bloomberg News said. They have resulted in grisly mutilations, such as severed fingers, and have pressured the French government to do more to stop them, even if statistically, France scores relatively well on crimes such as homicide.
This goes way beyond one country; crime is changing everywhere. Banks are no longer easy or juicy targets for robbers, with heists down more than 80 percent since the 1990s, as branches close and piles of cash hoarded in safes become a rarity. We are also all carrying less cash in a payments world driven by taps and swipes. Personal safety was one reason put forward by ABBA’s Bjorn Ulvaeus a decade ago for making Sweden a cashless economy.
Meanwhile, other forms of criminality have become more prevalent as technological and social upheaval sees bandits adapt. The spread of digital wallets on platforms such as Coinbase Global Inc is attracting hackers, most recently to obtain client data.
Exchange hacks rose 17 percent last year, compliance firm TRM said. High-value muggings such as watch theft have become more lucrative, with the total value of lost and stolen timepieces in the UK now at ￡1.6 billion (US$2.17 billion), Watch Register said. Home-jackings are also on the rise; celebrity Kim Kardashian was robbed at gunpoint in a Paris hotel in 2016.
The rise of physical attacks on crypto holders and their families is the grimly logical next step, a symbolic return to the pre-banking days of highway robber Dick Turpin. The downside of high capital mobility is high physical vulnerability: Extorting crypto face-to-face is known as a “wrench attack,” because of its simplicity, brutality and potential high return. One social media slip-up can reveal your whereabouts to criminals, who themselves are also becoming more tech-savvy and able to organize a heist through digital channels.
Deterrence is going to be key in tackling this kind of crime, and it is heartening that police are doing a good job tracking down gangs and seizing ransom payments. What is less encouraging in France is prison overcrowding and its knock-on impact on sentencing.
Yet the debate about how to balance security and liberty is also brushing up against crypto’s libertarian ethos. Some industry entrepreneurs think the best way to avoid being targeted is more anonymity — and the right to bear arms, which is tightly regulated in France.
Without sounding too squeamish and European, I am not convinced.
“Carrying a weapon is a serious step requiring serious training,” said Bruno Pomart, a former member of elite police unit RAID. “Nor does it solve the problem of vulnerable family members based elsewhere.”
The more likely outcome would be demand for private security firms and better protection.
Security specialist Topaz Group CEO Salvatore Furnari said he is increasingly in touch with crypto-industry figures and advising them on a top-to-bottom rethink of how to protect themselves and their associates.
“The crypto world is going through the same things banks used to,” he said.
However, this all comes at a cost — and it might be that some types of investors decide that owning crypto is not worth it.
One tech executive said he simply sold his portfolio for peace of mind.
Regulators might also eventually decide that crypto needs to be more centralized, not less, to help combat crime.
After Italy was hit with a wave of shocking abductions during the “years of lead,” the government eventually moved to dissuade extortion by freezing victims’ financial assets and those of their families.
This would be clearly anathema to crypto owners. However, if we are all going to end up being our own bank, it might be another type of alarm to consider.
Lionel Laurent is a Bloomberg Opinion columnist writing about the future of money and the future of Europe. Previously, he was a reporter for Reuters and Forbes.
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