b-next, the specialist provider of capital markets compliance solutions, has issued a new White Paper entitled ‘Tackling Cryptocurrency Fraud’ which explains how automated surveillance systems can monitor blockchains for fraudulent activity.
The blockchain revolution is developing rapidly and garnering significant interest in the financial sector. However, a lack of regulation or standards leaves activity on blockchains exposed to fraud. Cryptocurrencies including Bitcoin run on blockchains and reports of fraud and manipulation have led to the launch of criminal investigations. Such reports have highlighted a need to monitor for market abuse on blockchains.
The task of monitoring blockchains, however, is fraught with complexity. The anonymity inherent in blockchains makes it difficult to trace individuals and identify safe areas. Other vulnerabilities include exposure to market manipulation due to poor understanding of the risks involved in trading cryptocurrencies. In addition, many exchanges used to store Bitcoin have been shown to be highly vulnerable to episodes of hacking and theft.
This is where automated surveillance has a valid role to play. The new White Paper explains how such systems offer an efficient and practical means of monitoring blockchains. This can be achieved in two stages:
*Rating engines can be used to help market participants identify the most reliable entities on blockchains
*Surveillance systems can be combined with rating engines, allowing the monitoring of fraudulent activity on blockchains by generating alerts on trading frequencies, holding periods and ‘Watchlist’/restricted lists
This form of surveillance helps to protect participants from fraud on blockchains, while making transactions on blockchains that much safer.
*The White Paper is available for download at https://www.b-next.com/download/Whitepaper-Blockchain-Surveillance.pdf