Stablecoins are built for payments—but to go mainstream, the industry must first overcome Web3’s persistent fraud problem.
Payments on stablecoin rails check all of the right boxes for mass adoption: regulatory tailwinds, installed infrastructure, proven product-market fit. Except for one missing piece—security.
This is what being poised for a mainstream moment looks like: stablecoin market cap rose 48% and volumes hit $27T last year; new U.S. bills like the GENIUS and STABLE Acts promise to deliver a long-awaited regulatory unlock; major players from JPMorgan, Fidelity, and BoFA to Stripe, PayPal, and Visa positioning for the shift. Standing in the way—the outsized scale of Web3 fraud.
There is still fraud in TradFi, and billions of dollars a year are lost to scams using checks, Authorized Push Payment (APP), and credit cards. But the problem in crypto is magnitudes greater relative to its scale. In the second half of 2024, the Hypernative platform detected $100s of millions in funds lost to phishing, scams, and fraud by centralized exchange users alone.
Crypto presents 3 unique security challenges for would-be payment providers: transactions are non-reversible, the fraud infrastructure is easily accessible and cheap, traditional fraud-detection methods fall short. Fortunately, we now have the tools to tackle this problem.
In TradFi, it's not unusual to be able to reverse a fraudulent transaction as much as 30 days after the fact. That gives defenders a lot of time and a lot of signal to identify bad actors. In 2023, the FBI's Recovery Asset Team was able to place hold on $538M of stolen funds, representing a success rate of 71%.
The situation is different in Web3. Because immutability is a core attribute of blockchains, most transactions are irreversible. This means that fraud determination has to happen at the moment of the transaction, calling for an approach to security that is both proactive and predictive.
Pink Drainer, Medusa Drainer, Angel Drainer -- none of these will fix your toilet. But much like the plumbing products at your local home center, these wallet drainers are available for sale to anyone on the dark web. These Fraud-as-a-Service vendors make it easy for anyone to launch a phishing campaign in minutes—no Web3 expertise required.
You can see this technologically-driven acceleration in the average lifespan of malicious contracts, which is now 4x shorter than just four years ago. The addition of powerful open-source language models that can be adapted for nefarious means will only accelerate this trend by making identity fraud easier to perpetrate and harder to resist.
The global fraud detection and prevention industry is a $53B business. Unfortunately, much of this anti-fraud infrastructure does not work in the blockchain context. Traditional finance relies on accounts, which take time to create and entail extensive KYC processes. Crypto runs on anonymous wallets, which offer few ways to verify ownership and can be spun up by the thousands in minutes with just a few lines of code.
This presents a problem for traditional security approaches which rely on static databases of bad actors that clients can reference to filter transactions. This time-intensive process of data collection and address labeling takes weeks to update with new information and often misses bad actors altogether. More importantly, this cadastral survey approach to Web3 compliance is a fundamentally poor match for blockchains.
Read more: Memecoins Gone Wild: When Compliance Gets Weird
What the industry needs is real-time fraud that continuously monitors activity at the block level and instantly updates address reputation. This Web3-native approach also needs to take into account direct as well as indirect (multi-hop) exposure to illicit activity across multiple chains. The high-accuracy alerts generated by that kind of monitoring can then be connected to automated actions to create a truly proactive security stack.
We built Hypernative to be that solution. The system tracks funds across bridges and value transfers across more than 60 blockchains using both onchain and offchain data sources. Our battle-tested, sophisticated machine learning models, heuristics, simulations, and graph-based detections can identify over 300 risk types, helping secure more than $100 billion of customer funds.
That's why leading stablecoin issuers choose Hypernative's real-time risk monitoring and automated response platform to protect their infrastructure, stop impersonators, and stay compliant. Hypernative helps secure more than $65B worth of stablecoins, with $879B monthly transfer volume, and 100K+ holders across 12 networks.
Read more: How Hypernative Secures a $65B Stablecoin Economy
Stablecoin payments are inevitable, and their mainstream adoption will go hand in hand with that of real-time, crypto-native fraud-prevention tools. Some of the change will come from the inside, led by security-forward projects. Some will come from regulators that are already making moves to make payment providers accountable for the losses, like the UK's mandatory reimbursement rules for APP fraud. All of it will propel crypto to a new level of adoption that will have lasting impact on all of Web3.
Hypernative is a real-time monitoring, risk detection and automated response solution that identifies threats with high accuracy and gives customers precious minutes to respond before exploits can do damage. The platform tracks both onchain and offchain data sources and uses battle-tested, sophisticated machine learning models, heuristics, simulations, and graph-based detections to identify over 300 risk types, from smart contract hacks and bridge security incidents to frontend compromises, market manipulations and private key theft.
Reach out to find out how Hypernative’s solutions help payment providers stop fraud and scams, secure their crypto off- and on-ramps, and automate their compliance and screening. Tune into Hypernative’s blog and our social channels to keep up with the latest on cybersecurity in Web3.
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