payment gateway

A Guide to Key Cryptocurrency Security Protocols for Safe Crypto Payment Gateways

Stay updated on top security threats and top cryptocurrency security measures required for crypto payment gateways.

Rapid development and proliferation of cryptocurrencies made cryptocurrency security (in all aspects) more important in the crypto industry than ever before. On the one hand, the growing value of crypto assets made them a prime target for cyber criminals all over the world and we see their attacks becoming more and more sophisticated. On the other hand, security is a natural concern for newcomers, so security improvement is also an important element of growth for any project, while security breaches can heavily damage any company’s reputation and growth prospects.

Common Security Threats

The most common threats to a crypto payment gateway are:

Code Vulnerabilities in the API

Source: Crypto.news

APIs (Application Programming Interfaces) serve as the backbone for communication between different software applications, making them critical components of crypto payment gateways. However, vulnerabilities within these APIs can expose gateways to various attacks. These vulnerabilities often arise from inadequate input validation, improper authentication and authorization controls, and flawed logic that hackers can exploit to gain unauthorized access or manipulate the gateway's operations.

Code Vulnerabilities in the Crypto Wallets Connected to the Gateway

Wallets are essential for storing and managing cryptocurrencies, and their integration with payment gateways facilitates transactions. However, vulnerabilities in wallet software can lead to dire consequences, including the theft of private keys and funds.

Malware Infection

Malware infections pose a threat to crypto payment gateways, as malicious software can be designed to steal funds, hijack transactions, or compromise sensitive data. Phishing attacks often introduce malware, tricking users into downloading infected files or visiting compromised websites. Additionally, malware like cryptojacking scripts can exploit a system's resources to mine cryptocurrency without permission.

Source: Blaze

Social engineering attacks exploit human psychology rather than technical vulnerabilities, making them particularly challenging to guard against. Phishing emails, pretexting, baiting, and quid pro quo are common tactics used to deceive individuals into disclosing sensitive information or performing actions that compromise security. Attackers might impersonate support staff or use urgent or enticing messages to manipulate users or employees into divulging passwords, enabling unauthorized access, or directly transferring funds.

Must-Have Security Measures for Crypto Payment Gateways

Below are some non-negotiable cryptocurrency security measures for payment gateways.

Multi-factor Authentication (MFA)

Source: aNetworks

Multi-factor authentication certainly is a necessary security requirement for any modern platform, let alone one handling money and cryptocurrencies. MFA requires users to enter more information than just their username and password to log into the system.

The most commonly used additional authentication factors are:

Knowledge factor - some information that is known only to the user, such as pin code, mother's maiden name, and so on.
Possession factor - proof that the user has something only they own, such as a mobile phone or email account. Apps like Google Authenticator, SMS or email codes, and push notifications are typically used to verify this factor.
Inherence factor - something inherent to a specific user. For example, fingerprints of keystroke patterns.

Typically, platforms require only 2 authentication factors (password and something else). Thus, MFA is often called two-factor authentication (2FA), but it can be beneficial to include more factors, especially for employees.

Benefits of MFA in payment gateways

MFA significantly reduces security risks by adding a layer of defense. Even if attackers manage to get a hold of a user’s login and password, it won’t be enough - they won’t be able to access the system without completing MFA.

Also, MFA facilitates the detection of suspicious activities and login attempts. For example, if a login attempt and MFA submission happen from different locations - it can be detected and additional security and verification measures can be undertaken.

Implementation tips and best practices

There shouldn’t be any way to bypass MFA for either clients or employees
MFA implementation does not make strong password policies less necessary
User roles with strictly defined rights and progressively more advanced MFA requirements help a lot
It is a good practice to ask users to change access credentials from time to time

Encryption

Source: Crypto PSP’s

Data encryption is essential to ensure the security of sensitive data during transmission. It is impossible to have even a remotely secure payment gateway without data encryption.

It is a good practice for crypto payment gateways to follow the encryption standards of the “traditional” finance industry. The guidelines provided by the Payment Card Industry Data Security Standard (PCI DSS) are a good starting point.

Ideally, end-to-end encryption should be implemented, meaning that data is encrypted from the client's device to the payment processor and is not exposed as plain text at any moment.

Importance of data encryption

Transmission of sensitive data as plain text is, perhaps, the easiest and fastest way to get into huge trouble in the payment industry. Without encryption, it is impossible to prevent unauthorized access to clients’ accounts, theft of funds, and fraud.

Moreover, it would also be extremely difficult to find people ready to use a payment gateway that doesn’t use encryption.

Regular Security Audits

Security audits are the only way to check whether your crypto payment gateway is indeed secure and if there are no gaping holes in its defenses.

The role of security audits in maintaining a secure gateway

First of all, there is always a risk of an oversight or error leading to a vulnerability. A thorough audit can detect such vulnerabilities and allow for their elimination before they can be exploited by malicious actors.

Second, cybercriminals are also learning. A perfectly secure gateway can suddenly become vulnerable to a newly developed attack. An audit can detect such vulnerabilities and enable the development of corresponding security measures.

Hiring third-party auditors vs. in-house audits

The main advantage of third-party auditors is their independence. They do not have any connections in your company and can’t be influenced by friendships, “office politics,” or subordination. However, external audits are expensive.

Hiring Third-Party Auditors

Advantages:

Expertise and Specialization: Third-party auditors often bring experience and specialized knowledge in cybersecurity and cryptocurrency security. They are likely to be more familiar with the latest threats, vulnerabilities, and best practices for mitigating risks.
Objective Perspective: External auditors provide an unbiased assessment of the security posture. Their independence ensures that they can identify vulnerabilities without internal biases or conflicts of interest that might affect in-house teams.
Regulatory Compliance: Many third-party auditors are well-versed in regulatory requirements and can ensure that audits align with the latest legal and compliance standards. This is crucial for crypto platforms operating in multiple jurisdictions.
Reputation Assurance: Employing reputable third-party auditors can bolster confidence among users and investors, demonstrating a commitment to maintaining high security standards.

Challenges:

Cost: Engaging third-party auditors can be more expensive than conducting audits internally, especially for frequent or ongoing evaluations.
Confidentiality Risks: Sharing sensitive information with external parties always carries a risk. There’s a need for strict confidentiality agreements to protect proprietary or sensitive data.

Conducting In-House Audits

Advantages:

Cost-Effectiveness: In-house audits can be more cost-efficient, particularly for regular security checks or when the organization has competent security personnel.
Familiarity with Systems: Internal auditors have an intimate understanding of their organization's systems, operations, and risk environment. This can make it easier to identify and address vulnerabilities specific to the organization.
Flexibility and Responsiveness: In-house teams can conduct audits on an as-needed basis and respond more swiftly to emerging threats or vulnerabilities.
Continuous Improvement: Regular internal audits facilitate a culture of continuous improvement and security awareness among staff.

Challenges:

Limited Perspective: In-house auditors may lack the breadth of experience that external auditors possess, potentially overlooking novel threats or industry-wide best practices.
Resource Constraints: Smaller organizations may not have the resources to maintain a dedicated in-house audit team with the necessary expertise in cryptocurrency security.
Bias and Compliance: There’s a risk of bias, as internal auditors might have conflicts of interest or face pressure to downplay security issues. Additionally, ensuring compliance with external regulatory standards might be more challenging.

The choice between third-party and in-house audits should be informed by an organization’s specific needs, resources, and the regulatory landscape it operates. A balanced approach, utilizing both third-party audits for their objectivity and comprehensive expertise, and in-house audits for their cost-effectiveness and deep understanding of the organization, can often provide the most robust cryptocurrency security framework.

Frequency and best practices for security audits

“The gold standard” for the industry is to conduct a third-party security audit twice a year. It is also a common practice to conduct additional audits after major gateway updates or after major security-related events in the industry.

It would be wise to supplement third-party audits with in-house security audits and assessments. In-house audits can be conducted far more often to ensure that security measures are adequate in the ever-changing environment.

Monitoring

Audits, however, can not replace constant security monitoring. Monitoring allows both the gateway and merchants to catch suspicious transactions and activities and block possible attacks at the very early stages before they manage to inflict serious damage. Thus, gateways that enable easy tracking of transactions on multiple crypto wallets, such as Blockonomics, have a significant security advantage.

API Security

Source: DuoCircle

API is by far the favorite vector of attack for most hackers. API vulnerabilities are, unfortunately, quite common and varied. At the same time, API attacks can have an exponential effect and grant the hacker access to a lot of sensitive data.

Risks associated with API vulnerabilities

The most common API security risks are:

Injection attacks

Injection attacks occur when an attacker manages to insert or "inject" malicious code or data into an API request. This can manipulate the API to perform unintended actions, such as accessing or modifying data without authorization. The consequences can range from data breaches to complete system compromise. Protecting against injection attacks requires rigorous validation and sanitization of all user inputs, ensuring that only properly formatted data is processed by the API.

Broken authentication and session management

Authentication mechanisms verify the identity of users, while session management tracks their interactions with the application over time. When these processes are improperly implemented, attackers can exploit them to assume the identity of legitimate users. This could lead to unauthorized access to sensitive data or functionalities within the system. Implementing robust authentication protocols and secure session management practices, including the use of tokens and secure cookies, is critical for mitigating these risks.

DDoS attacks

Distributed Denial of Service (DDoS) attacks aim to overwhelm the API with an excessive amount of requests, rendering it unavailable to legitimate users. This can disrupt operations, leading to financial losses and damaging the organization's reputation. In 2018, the Bitcoin community faced a significant challenge when a coordinated group of hackers launched a DDoS attack using a botnet. This assault targeted the Bitcoin network, overwhelming it with an unprecedented level of traffic. As a result, several leading Bitcoin exchanges, including Bitfinex and Kraken, experienced downtime. To defend against DDoS attacks, organizations can employ rate limiting, traffic analysis, and DDoS protection services that detect and mitigate abnormal traffic patterns.

Misuse of API keys

API keys are used to control access to APIs, acting as a unique identifier for the user or application making the request. If API keys are exposed or misused, attackers can gain unauthorized access to the API. Securing API keys involves implementing strict access controls, regularly rotating keys, and using environment variables to store keys securely.

Lack of inputs, redirects, and forwards validation

Without proper validation, an attacker could manipulate inputs, redirects, or forwards to redirect users to malicious sites or leak information through manipulated responses. Validating all inputs, redirects, and forwards within the API ensures that only intended actions are performed, protecting users from phishing attacks and data exfiltration.

Lack of access control

Access control defines what authenticated users are allowed to do within the system. Insufficient access control can lead to privilege escalation, where attackers gain higher-level permissions than intended. Implementing role-based access control (RBAC) and the principle of least privilege ensures that users have only the access necessary to perform their roles, reducing the risk of unauthorized actions.

Lack of monitoring and logging API requests

Monitoring and logging are critical for detecting and responding to security incidents. Without adequate logging of API requests, malicious activities can go unnoticed until it's too late. Effective monitoring and logging practices involve capturing detailed logs of all API transactions and regularly analyzing these logs for signs of suspicious activity. This allows for rapid detection and remedy of potential security threats.

Strategies for securing API endpoints

Naturally, your API security strategy must take into account the risks mentioned above. But another important (and, surprisingly, rarely implemented) component of the strategy is to make sure that only the necessary information is exposed through the API endpoints. This principle, often referred to as the "principle of least privilege," ensures that each component of the API has access only to the data and resources that are necessary for its intended function. By minimizing the amount of data each part of the API can access, you significantly reduce the potential impact of a security breach.

User Education and Training

The human is, unfortunately, the weakest link in any security system in any sphere, and the cryptocurrency industry is no exception. The majority of the largest attacks on crypto platforms and crypto thefts involved social engineering or exploited a simple human error. Some social engineering attacks were quite sophisticated - even staged job interviews were set up in some cases.

The only effective method of preventing such attacks is to educate your users and train your employees. It is worth it to regularly remind your users of the importance of backups, proper security of their recovery phrases, cold storage of their crypto, etc.

It is also vital to train (and regularly retrain) your employees to recognize security threats, properly respond to them, and be more resistant to social engineering attacks.

Compliance with Regulations

Source: Complytek

Nowadays, the regulatory requirements in the crypto payments industry are extremely complicated and vary from region to region. The only globally applied requirements are AML and KYC regulations. However, it is possible that MiCA regulations, recently introduced in the EU, will become the de facto standard soon.

Tokenization

Source: icommunity

Tokenization of sensitive data is a crucial technique in ensuring crypto payment gateway security. It involves replacing account details with unique payment tokens that are then used to authorize payments and identify transactions.

Due to tokenization, merchants and processors never get access to actual account details. Thus, even if the data is leaked, users’ funds are safe since the data does not contain actual payment credentials.

Importance of Cryptocurrency Security in Crypto Payment Gateways

Dual Asset Risk Management (For some gateways)

Crypto payment gateways handle both digital (cryptocurrencies) and for some, traditional (fiat currencies) assets, doubling the potential targets for malicious actors. The dual nature of some of these transactions requires comprehensive security measures that protect against threats to both asset types, emphasizing the need for a multifaceted approach to cryptocurrency security.

Complexity of Transactions

Transactions through crypto payment gateways often involve multiple steps and parties, including banks, crypto wallets, and blockchain networks. Each step introduces potential vulnerabilities that could be exploited by attackers. Ensuring secure integration and communication between these components is paramount to maintaining transaction integrity and user trust.

Regulatory Compliance and Reputation

Beyond the direct financial risks, payment gateways must also navigate complex regulatory environments that govern both fiat and digital currencies. A breach not only results in financial loss but can also lead to non-compliance with financial regulations, potentially incurring legal penalties and damaging the gateway's reputation. Implementing stringent security measures helps ensure compliance and protect the company's standing in the market.

User Trust and Adoption

The security of a crypto payment gateway directly impacts user trust, which is crucial for adoption and continued use. Users need to feel confident that their assets are safe and that their transactions are secure. A history of robust security measures and transparent practices can enhance user confidence, driving adoption and loyalty.

Innovative Attack Techniques

Cybercriminals continuously develop new methods to breach security systems. Crypto payment gateways must stay ahead by constantly updating their security measures, employing the latest technologies, and adopting best practices in cybersecurity. This ongoing battle requires gateways to invest in advanced security solutions, including artificial intelligence and machine learning, to predict and prevent emerging threats.

Takeaway

Security is paramount for a crypto payment gateway. The very nature of a payment gateway makes it a prime target for cybercriminals, so without top-notch security, it is not possible to provide clients with quality service and handle their funds reliably. Guidelines for the fiat payment industry provide decent minimum security standards. Also, in all circumstances, users’ funds security should be the main priority for the gateway. Take a look at our Wallet Watcher to track and monitor your funds today

Frequently Asked Questions

Is security a one-time effort, or should it be an ongoing process for crypto payment gateways?

Security, particularly when it involves cryptocurrency security, must be recognized as a continual process rather than a one-time effort. The digital landscape, especially within the cryptocurrency domain, is evolving with new threats and sophisticated cyber-attacks emerging at an unprecedented pace.

This environment necessitates that crypto payment gateways continuously update and fortify their security protocols to safeguard against potential vulnerabilities. Regular updates, vigilant monitoring, and adaptive strategies are crucial to maintaining the integrity and trustworthiness of crypto payment systems.

How do I choose a reputable third-party auditor for security audits of my crypto payment gateway?

Choosing a reputable third-party auditor for your crypto payment gateway is important in ensuring the efficacy and reliability of your cryptocurrency security measures. Look for auditors with a strong cybersecurity background and specific experience in the cryptocurrency payment industry.

This specialization is crucial as it ensures the auditor is familiar with the unique challenges and threats faced by crypto payment gateways. Additionally, reviewing their previous audits can provide insight into their expertise and effectiveness. A thorough auditor will not only identify current vulnerabilities but also provide recommendations for strengthening your gateway's security.

What steps should a business take if they suspect a security breach in their crypto payment gateway?

In the event of a suspected security breach within a crypto payment gateway, immediate action is essential to mitigate potential damages. The first critical step is to halt all transactions; this preemptive measure protects users' funds from unauthorized access and potential theft.

Concurrently, notifying users about the breach is vital for transparency and can help prevent further unauthorized transactions. Following these initial steps, conducting a thorough investigation to identify the breach's source and scope is necessary. This analysis not only aids in resolving the current breach but also in fortifying the gateway against future incidents, reinforcing the foundation of cryptocurrency security.

What measures can businesses take to rebuild trust with their users after a security breach?

Restoring user trust after a security breach in a crypto payment gateway demands a comprehensive approach centered around transparency and accountability. You need to show a commitment to cryptocurrency security by openly communicating the breach's details, the steps taken to resolve it, and the measures implemented to prevent future incidents is crucial.

Offering compensation for users’ losses can further exemplify the gateway's dedication to its users' security and well-being. Engaging with the community through regular updates and open channels of communication can also rebuild confidence in the platform's security measures and commitment to its users.

What role do decentralized technologies play in improving the security of crypto payment gateways?

Decentralized technologies play a transformative role in enhancing the security framework of crypto payment gateways. By distributing data across a network rather than storing it in a central location, decentralized systems inherently reduce the risk of single points of failure, a significant vulnerability in traditional centralized models. This decentralization not only bolsters the resilience of the system against attacks but also enhances user privacy and control over their data, foundational principles of cryptocurrency security.

Are there any emerging technologies that can enhance the security of crypto payment gateways?

Emerging technologies, notably quantum-resistant cryptography, and decentralized identity systems, hold the potential to advance cryptocurrency security significantly. Quantum-resistant cryptography addresses the looming threat of quantum computing, which could break traditional encryption methods, ensuring that crypto payment gateways can safeguard sensitive data against future quantum attacks. Decentralized identity systems, on the other hand, provide a secure and user-controlled identity verification method, minimizing reliance on centralized authorities and reducing the risk of identity theft.

Table of Contents