According to Chainalysis, total cryptocurrency transactions grew 567% to reach $15.8 trillion.
Cryptocurrency crimes are also growing with their popularity. It reached an all-time high level in 2021, $14 billion in 2021, up from $7.8 billion in 2020.
Last year, investors lost $7.7 billion from crypto-related scams.
Cryptocurrency is an unregulated digital currency in many countries. Many countries, like India, have been trying to legalize digital currency.
Recently, in the union budget, India announced the legalization of digital currency by bringing it under the central banking system with a 30% tax.
In light of this, to compact the crypto-crimes and legalize them, a personalized authentication method is required.
The statistics indicate that digital money has become very popular in recent years. The same is the reason for the security breaches in digital currencies: many people are jumping into blockchain without fully understanding it. Plus, there is a lack of regulation to protect consumers against hacking and the easiness of transactions that attract people. Most digital wallets and cold wallets that hold cryptocurrencies are encrypted using standard authentication techniques that are easy for hackers to breach. The inefficiency of passwords and PINs made biometrics the most efficient, secure, and accurate authentication method to make their way into digital currencies.
Let's see a few of the use cases of biometrics in digital currencies.
Where do biometrics stand in digital currency?
Many digital currencies are using biometric account verification, and some of them are offering free coins for those who authenticate with biometrics. Securing wallets and authentication of e-sign in transactions are the two use cases of biometrics in the digital currency market.
Biometric safeguards digital wallets
Basically, two types of wallets are used to store cryptographic keys: hot wallets and cold wallets. Both need to be secured from hackers to avoid stealing, modification, and deletion of crypto keys from the wallet.
Hot wallets are laptops, desktops, smartphones, and tablets; they are more susceptible to hacking. Biologin is the option to secure such wallets. Even though the latest laptops, smartphones, and other smart devices come with biometric scanners such as fingerprint and face-scanning cameras, the majority of people still use desktops and laptops that don't have biometric scanners. However, people can still use biologin devices with Windows 7 and above systems. It can secure the crypto keys saved in the device's storage.
Cold wallets refer to an external storage device such as a USB, hard disk, or any other offline storage device. Cold wallets are more secure, so investors who deal with a large quantity of crypto use this method. Passwords and PINs were formally used to protect these devices, but there are still ways to increase their security against potential breaches and theft, such as biometric authentication.
Adding a biometric scanner to the external cold wallet devices can personalize the authentication for the wallet. Using peripheral biometric devices eradicates the risk of hacking and simplifies authentication. Even if the cold wallets get lost, other people cannot access the device.
Signing the crypto transactions with biometrics
Crypto transactions are consented to through the use of digital signatures and transaction verification. Digitally signed papers can be signed using biometrics. These digital documents are signed by combining fingerprint biometric data or facial information with the user's information. The above-mentioned authentication technique brings tremendous value in terms of security and transparency while conducting commercial transactions. It also safeguards against illicit behaviour by asking users to sign transactions with their personal information.
Legalizing digital currency with biometric technology
Recently, news came out with the announcement of the finance minister of India in the union budget that the Reserve Bank of India will launch a central bank digital currency (CBDC) this year. The aim is to create a legalized digital currency in the country with a tax rate of 30%.
Obviously, the accounts need to bind with a secure and accurate identification method to ensure the funds transferred are for legal purposes only. India already has a citizen biometric ID: the Aadhaar ID. Aadhaar will most likely be the authentication ID for digital currency account opening and transactions. Biometric authentication requires for each transaction done that legally binds the person who did the transactions while ensuring the security of his funds.
By legalizing and introducing its own digital currency, the government can ensure that funds transferred are for legal, commercial, business, and personal purposes only. Therefore, it eliminates the utilization of digital currency for illegal activities and terror funding.
Future of biometrics in digital currency
Even though people are not fully aware of the technology behind digital currency, investments are skyrocketing. Companies like Tesla, Microsoft, and Expedia have already started accepting Bitcoin and crypto for their services and products. Also, a survey conducted in the UK states that people most prefer to pay in digital currencies at stores.
Governments may ensure that all transactions are validated using efficient biometric authentication creating digital IDs. This will assist developing countries in legalizing digital money and taxing it.