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How AI Deepfakes Could Threaten Crypto Exchanges’ Identity Verification

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Cryptocurrency exchanges rely on identity verification tools to ensure the security and compliance of their users. However, these tools could be at risk as artificial intelligence (AI) technology advances and enables the creation of realistic deepfake proofs of identity.

Deepfakes are synthetic media that use AI to manipulate or generate images, videos, or audio of real people. They can be used for various purposes, such as entertainment, education, or malicious deception.

One example of a deepfake tool is HeyGen, a platform that allows anyone to create a lifelike digital avatar in just two minutes. The platform’s co-founder and CEO Joshua Xu demonstrated how he can use his own AI-generated avatar and voice clone to produce a video that looks and sounds just like him.

The video was shared by Changpeng Zhao, CEO and founder of Binance, one of the largest global crypto exchanges.

Zhao warned his followers on Twitter about the potential implications of such technology for video verification processes in crypto.

“This is pretty scary from a video verification perspective. Don’t send people coins even if they send you a video,” Zhao tweeted.

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Why Video Verification Matters for Crypto Exchanges

Video verification is a common method used by crypto exchanges to verify the identity and authenticity of their users. It involves asking the user to record a video of themselves holding an identity document, such as an ID card, driver’s license, or passport, and saying a specific phrase or date.

This method is supposed to prevent fraudsters from using stolen or forged documents to access the exchange’s services or withdraw funds from other users’ accounts.

It is also part of the Know Your Customer (KYC) measures that crypto exchanges implement to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.

However, video verification could become ineffective if fraudsters can use AI deepfakes to create convincing videos of themselves posing as legitimate users. They could potentially bypass the exchange’s security checks and gain access to sensitive information or funds.

How Crypto Exchanges Can Protect Themselves from AI Deepfakes

As AI technology becomes more accessible and sophisticated, crypto exchanges need to adopt more robust and reliable identity verification solutions. Some possible ways to do so are:

Using biometric authentication: Biometric authentication is a method that uses the user’s unique physical or behavioral characteristics, such as fingerprints, face, voice, or iris, to verify their identity.

Biometric authentication is harder to spoof than video verification, as it requires the user to present their live biometric data rather than a recorded or generated one.

Using blockchain-based identity: Blockchain-based identity is a method that uses the decentralized and immutable nature of blockchain technology to store and verify the user’s identity data.

Blockchain-based identity can provide more security and privacy than traditional identity systems, as it eliminates the need for intermediaries and central authorities that could be compromised or corrupted.

Using multi-factor authentication: Multi-factor authentication is a method that requires the user to provide more than one piece of evidence to prove their identity, such as a password, a code sent to their phone, or a hardware device.

Multi-factor authentication can add an extra layer of protection against fraudsters who may have access to one or some of the user’s credentials but not all of them.

AI deepfakes pose a serious challenge for crypto exchanges’ identity verification tools. However, by adopting more advanced and innovative solutions, crypto exchanges can enhance their security and compliance and protect their users from potential harm.