Enhanced Security: Exchanges Embrace Hardware 2FA for Crypto Funds

Phishing scams are on the rise, with criminals using various means to trick victims into giving up their personal information. The National Cyber Security Centre in the UK has reported that 29 million phishing scams have been reported since the beginning of 2024. In 2023, over 324,000 crypto users fell victim to phishing scams, losing around $295 million in digital assets. To combat these scams, some cryptocurrency exchanges are encouraging users to use specific devices as an added layer of security. Coinbase and Binance, for example, offer support for YubiKey devices, which provide two-factor authentication (2FA) and are considered the most secure form of authentication.

Jimmy Su, Chief Security Officer at Binance, explained that the physical access required for YubiKeys makes them more secure than other 2FA methods such as SMS or email codes. In addition to YubiKeys, some exchanges, including Coinbase and Gemini, have introduced a new form of multi-factor authentication called “passkeys.” These passkeys use a cryptographic technique linked to a user’s device, like their smartphone, making them more convenient than physical YubiKeys.

Tom D’Eletto, Head of Product at Arculus, believes that hardware-bound passkeys, such as USB dongles or NFC-enabled cards, offer the best security. Arculus has implemented its own FIDO2-certified keys in the form of a metal credit card, allowing users to simply tap their card to authenticate on their phone. While these measures protect against phishing attacks, Shahar Madar, Vice President of Security and Trust Products at Fireblocks, notes that they cannot prevent a cryptocurrency exchange hack.

To further protect their funds, crypto users can consider keeping them on a hardware wallet, which is recommended by Singapore authorities. Hardware wallets also come with their own challenges, as losing the private keys can result in the loss of funds. In the case of a YubiKey associated with a Coinbase account, the user can still regain account access if the device is lost.

While measures like YubiKeys, passkeys, and hardware wallets provide protection against phishing scams, they cannot guarantee protection against exchange hacks. It’s important for crypto users to stay vigilant and take additional steps to secure their funds.