How to secure your platform’s future: 3 steps to mitigate crypto fraud

In our previous posts, we explored the rising cost of fraud, and the most dangerous types of crypto fraud. Now, let’s get practical. This final instalment provides a step-by-step framework to fortify your platform, mitigate fraud risks, and earn trust in an industry where safety is the ultimate competitive edge.

Step 1: Assess your platform’s vulnerabilities 

Security begins with a clear-eyed understanding of your platform’s vulnerabilities. Start by conducting comprehensive audits that go beyond surface-level penetration testing. These audits should include:

• Smart contract audits to detect vulnerabilities like logic errors and reentrancy attacks
• Code reviews to examine your platform’s source code, identify bugs, and find weaknesses in APIs
• Threat modeling to understand your architecture and evaluate the impact of different threats
• Cryptographic configuration audits to verify that protocols and configurations are properly set up

Next, map risks across your customers’ journey. Identify friction points where customers are most exposed to fraud, such as during onboarding (e.g. phishing risks during KYC) or high-value transactions (e.g. insufficient safeguards for cross-chain swaps).

Also consider compliance audits, as regulatory failures can be quite damaging in their own right. Verify your adherence to relevant regulations (AML, KYC, GDPR) through systematic reviews of your compliance framework. Evaluate security controls against regulatory requirements like SOC2 or ISO 27001, scrutinise financial reporting practices, and assess risk management procedures to identify compliance gaps.

This multi-faceted approach of internal scrutiny, compliance verification, and external benchmarking creates a roadmap for addressing vulnerabilities before attackers get a chance to exploit your customers.

Step 2: Implement key security protocols 

With vulnerabilities now identified, next you need to build a multi-layered defence that combines technical safeguards, human processes, and customer protections.

Technical safeguards 

• Real-time transaction monitoring: Use behaviour-driven tools to flag anomalies, such as sudden large withdrawals or irregular login patterns. These systems can automatically freeze suspicious transactions and alert your security team, minimising losses.

• Dynamic scam detection: Implement risk screening using a database of scam wallets, ransomware-linked addresses, and malicious actors to detect compromised accounts and flag threats before they impact your customers.

• Connection analysis: Identify links between new wallets and known scams by tracing historical transaction hops. This forensic approach can detect sophisticated fraud attempts that might appear legitimate at first glance.

• Secure API integrations: Ensure all third-party APIs are encrypted and rate-limited to stop data being accessed or intercepted by unauthorised parties. Set limits on the number of requests that can be made to the API during a time period. By rate limiting, you can stop denial-of-service attacks, as well as requests overloading your systems.

• Cold storage for assets: Store the majority of customer funds offline to minimise exposure to hacks. Platforms like Coinbase put 98% or more of their customer assets in cold storage. This significantly reduces their risk of large-scale breaches.

Human processes 

• Role-based access controls (RBAC): Restrict system access based on the principle of least privilege, so your employees only have permissions needed to perform their specific job functions. Implement quarterly reviews of system access, with particular scrutiny for employees with administrative privileges. For instance, developers should not have access to withdrawal systems, and customer support teams should only be able to view limited customer data.

• Incident response drills: Simulate breaches quarterly to test your team’s readiness. These drills should include scenarios like phishing attacks, API exploits, and insider threats to ensure your team can respond swiftly and effectively. Complement these with annual third-party penetration testing to identify vulnerabilities that internal teams might miss.

• Security training: Educate employees on phishing, social engineering, and secure coding practices. Regular training sessions help staff recognize and mitigate risks, such as fake HR emails or malicious links. Ensure all employees are familiar with internal security policies and understand their role in maintaining the organisation’s security posture.

Customer protections 

• Transparent communication: Use plain language like “Your assets are insured 24/7” to reassure your customers. Clear, jargon-free explanations of security measures build trust and reduce customer anxiety.

• Two-factor authentication (2FA): Mandate 2FA for all customer accounts to reduce account takeovers. Platforms like Binance US have made 2FA mandatory, which significantly lowers unauthorised access incidents.

• Recovery solutions: Offer seed phrase backups or transaction reversal guarantees. For example, Ledger provides a wallet recovery service in case one of their users loses access to their seed phrase.

Step 3: Stay ahead of emerging threats   

The crypto landscape evolves rapidly, and so do its threats. Adaptive security measures help counter future risks. For example, behavioural biometrics can detect account takeovers via subtle cues like typing patterns or device fingerprints. This technology identifies unauthorised access even if login credentials are compromised, adding an extra layer of protection. 

Similarly, AI-driven fraud detection uses machine learning to identify and block suspicious activity in real time. These systems learn from past incidents to predict and prevent new attack vectors, ensuring that your defences evolve alongside threats.

Maintain rigorous security protocols that evolve with emerging threats. This includes secure coding practices that prevent vulnerabilities from being introduced in the first place, strong encryption standards for data at rest and in transit, and systematic vulnerability and patch management to rapidly address new security flaws. Regular system updates across your infrastructure are essential, because delays in patching known vulnerabilities are common attack vectors.

Build a security-first culture by launching bug bounty programs that incentivise ethical hackers to report vulnerabilities. In November 2024, Uniswap announced a $15.5 million bug bounty program for uncovering vulnerabilities in their v4 core contracts. Such programs not only strengthen your platform, but also build goodwill within the crypto community, because they signal your commitment to transparency and security.

Finally, quantum-resistant cryptography is another important consideration for forward-thinking crypto platforms. As quantum computing advances, traditional encryption could become vulnerable. Implement post-quantum cryptographic algorithms to protect the integrity of transactions against future quantum attacks. This shields customer data from next-generation threats that could otherwise decrypt sensitive information.

Security wins the market  

A 2024 Security.org survey of 1,500 Americans discovered that 80% were familiar with blockchain technology, but only 40% owned any actual crypto. That’s in large part because the people who haven’t yet invested in crypto are worried about losing their money. 

When those people do eventually invest, they will gravitate toward the most secure platform. While implementing the steps above will strengthen your platform's security, nothing provides complete peace of mind like CoinCover's protection solutions. We've developed the first defence specifically designed to protect the digital assets of your customers.

Our warranty-backed protection removes the risk of loss. This isn't another security layer. It's a fundamental shift in how you approach customer protection:

• Contractual warranty: On top of standard security measures, receive an extra layer of protection through a warranty on all validated transactions.
• Protection on the move: Safeguard assets every time someone makes a transaction.
• Trust as a competitive advantage: Signal to your customers that their security is your absolute priority, setting your platform apart in a crowded market.

The crypto platforms that will dominate the next wave of adoption won't necessarily be the most innovative. They'll be the most secure. By partnering with CoinCover, you're not just protecting your customers. You're securing your platform's future. Ready to fortify your platform against crypto fraud? Speak to CoinCover today.

Missed earlier posts? Start here to understand the stakes.