BSI Advises Hardware Wallets as Crypto Crimes Rise

Germany's Federal Office for Information Security (BSI) has urged crypto users to store their funds in hardware wallets.

Germany’s Federal Office for Information Security (BSI) has advised crypto users to store their funds in hardware wallets. The BSI stated that hardware wallets are optimal for storing digital assets because they store private cryptographic keys in a device that is not connected to the internet. The BSI made this recommendation following a sharp increase in crypto crimes and cyber threats in 2024.

The BSI highlighted the importance of using hardware wallets to safeguard digital assets. This approach differs from storing keys on exchanges or personal digital devices, as it involves ‘cold storage’ that is not connected to the internet until a transaction is made. This method minimizes the potential for cyber threats and unauthorized access to the system.

The office noted that keeping crypto assets on an exchange or any third-party service exposes them to risks such as hacking. While exchange-based custody offers convenience, it presents the assets with multiple risks, including hacking and internal fraud. In contrast, hardware wallets provide enhanced security, ensuring that even if the device is lost or stolen, the keys will not be compromised.

In addition to exchange risk, the BSI also discussed the dangers posed by self-custody wallets on personal digital devices. Storing the keys on phones or computers may seem safe, but they can be vulnerable to malware and other security threats. These devices can be hacked by phishing for passwords through malware or other software vulnerabilities or by physically accessing the device.

The BSI stated that self-custody provides the benefit of giving users complete control over their assets, but it also comes with risks. Hardware wallets that are protected by a PIN or offer opportunities for safe storage of backup are safer. They reduce the likelihood of losing access to digital assets due to device failure or attack by hackers.

The BSI’s advisory comes in response to a rising number of thefts and cybercrimes involving cryptocurrencies. According to Chainalysis’s data, the crypto market lost approximately $1.6 billion to hacking and exploitations in the opening half of 2024. The average value per incident was also on the rise, which can be attributed to the increasing value of virtual goods and services.

Scam Sniffer detected a rise in crypto-related phishing attacks, which caused losses of $341 million in the first half of the year. Of the attacks, the top 20 victims alone received $58 million, highlighting the extent of the damages caused. To mitigate these risks and avoid losing large sums of money, the BSI advises people to use hardware wallets.