Playing Safe

Tips on How to Safeguard Your Cryptocurrency Against Fraud and Theft.

- Teena Jain Kaushal

Amidst all the bitcoin frenzy, notwithstanding the drastic gyrations in the value of the cryptocurrency, it has become imperative to safeguard it. Because the bitcoin is stored in digital form and there is no central regulator to monitor the currency, one remains exposed to dangers such as fraud, loss of password and malware attacks. There have been instances of exchanges getting shut and, subsequently, millions of investors losing their money. As several investors dabble in cryptocurrencies with little or no knowledge about the risks involved, the finance ministry has put out a word of caution against investing in virtual currencies. It comes after three warnings issued by the Reserve Bank of India.

First, it is important to understand that when you buy bitcoins through an exchange, the ownership of the cryptocurrency lies with the exchange – just the way it does with your broker in a trading account until you transfer it to your demat account. For complete ownership of the bitcoins, you ought to transfer it to a bitcoin wallet so that you don’t lose ownership even on account of a fraud.

Sumanth Neppalli, cryptocurrency and blockchain analyst at Zebpay, a bitcoin exchange, says, “When you trade on exchanges your private key remains with the exchange, so they can even spend your bitcoins. Wallets give you the ownership and allow you to control your private keys.”