Newsbtc.com Claims Bitcoin Is More Secure Than Federal Reserve

by Tim Sloane 0

This article placed on Newsbtc.com claims:

“While the governments and banks continue to convince people that fiat currency and banking institutions are the most reliable and secure components of the monetary system, the recent report based on information obtained through the Freedom of Information Act has revealed that the cyber security of US Federal Reserve doesn’t even come close to that of many Bitcoin exchanges operating today. The report has revealed that the Federal Reserve has faced over 50 security breaches during a span of 5 years.”

The numbers The argument here is that Bitcoin exchanges are more secure? According to bitcointalk.org forum, between 2011 and November 16, 2014 there have been 48 instances of theft from Bitcoin exchanges. That’s 48 instances of theft in just 4 years, so let’s just call it even.

The article does identify a Bitcoin advantage related to the Federal Reserve’s vulnerability:

“Unlike digital currency exchanges, the banking system holds lots of confidential financial as well as personal information. Any security breach is most likely to compromise much more than money in these cases. While most of the incidents involving cyber-attacks on Federal Reserve or any other banking institution for that matter go unreported, the recent theft of over $81 million belonging to the Central Bank of Bangladesh from the Federal Reserve Bank of New York made it to the news.”

Because the Federal Reserve does know the identity of senders and recipients it is much more likely thefts will be identified and investigated. The example provided is the heist from the Central Bank of Bangladesh. Because participants are easily identified this heist is being investigated and according to the WSJ it appears there was involvement of an insider. An insider at an exchange would be equally positioned to steal bitcoin private keys held by that exchange. This is evident by the fact that Bitcoin exchanges are the primary target for criminals.

I understand that the Bitcoin community believes that the pseudo-anonymous nature of Bitcoin is a huge benefit, but it will almost certainly make it more difficult to investigate thefts, assuming thefts are even reported.

So as is often the case, perhaps this issue is just one more Rorschach test. Those that believe anonymity is a right will see the Bitcoin inkblot as a safer alternative to the Federal Reserve. Those that perceive the government is obligated and capable of protecting its citizens will likely see the inkblot as poorly equipped to manage criminal activity and so will opt for the Federal Reserve and law of the land.

Overview by Tim Sloane, VP, Payment Innovation at Mercator Advisory Group

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