Crypto Industry is Second Most Targeted for ID Scams in 2024
Cryptocurrencies are the second most targeted industry for identity fraud this quarter, according to a report by onboarding and identity verification firm AU10TIX.
Close to 29% of all global identity fraud attempts targeted crypto-related platforms, ranking only behind the payments sector, which comprised 52% of cases.
Deepfakes and Impersonation Bots at Play
Contributory to this alarming rise in fraud is the increasing application of sophisticated technologies such as deepfake tools and impersonation bots. They are also capable of creating very realistic fake accounts that may deceive people and even crypto platforms. While anonymity and privacy are highly valuable in blockchain technology, these very same features further create vulnerabilities that can be abused by scammers across exchanges, wallets, and decentralized platforms.
Add to that high-profile impersonation scams, the use of Elon Musk and Tim Cook in deepfake scams to pedal fraudulent crypto schemes among other names. Recently, in June 2024, crypto exchange Bitget reported a record increase of 245% in deepfake-related scams, putting global losses in crypto fraud above $25 billion by the end of this year.
Impact of Identity Fraud on Crypto Sector
In the field of cryptocurrency, identity fraud has been causing unprecedented financial destruction. The sector lost approximately $572 million in Q2 2024, and among such victims, the most vulnerable ones were decentralized finance platforms to phishing attacks, hacking incidents, and code exploits.
FaaS has also facilitated cyberattacks on the part of criminals, particularly in regions with lax regulations. The region of Asia-Pacific saw a 24% rise in identity fraud from 2022 to 2023, indicating the dire need for much-improved fraud detection and prevention tools.
Law Enforcement-Industry Response
Due to this growing threat of identity fraud, major crypto platforms, including Bitget, have teamed up with identity verification providers like Sumsub in a bid to reduce deepfake scam risks. They are joined by the governments and law enforcement agencies of different countries-the U.S. Federal Bureau of Investigation among them-that also increase their efforts to curb crypto-related fraud: in 2023, the latter reported losses from crypto frauds totaling $5.6 billion, with close to 69,000 complaints filed.
This calls for concerted enhancement of security measures at both the crypto industry level and the level of the individual user in view of these emerging threats. The more innovative fraudsters become, the more robust defenses will be needed to minimize risks and financial damage from complex identity fraud schemes.
Conclusion: Strengthening Defenses in Crypto Sector
While identity fraud remains one of the biggest challenges in cryptocurrency, given the blanket privacy that blockchain technology inherently provides to cybercriminals, the world is moving toward increasing deepfake technology, and it’s a target not just for individual people but also for platforms. The need for strong and adaptive security has never been so pressing. Together, crypto platforms and users can build stronger defenses against the ever-changing threat landscape, and thus help make this industry safer in the near future.
