Since we live in the age of data privacy regulators, we must pay close attention to whether we remain compliant with them. Especially when dealing with crypto, it’s even more important to remain compliant with consumer data privacy laws.
The crypto industry is very anonymous and data collection differs from other industries. However, what do you need to adjust in your crypto marketing strategy to remain compliant?
Let’s find out more in this article!
Blockchains and cryptocurrencies
Cryptocurrencies and data privacy go together, and their security and encryption make the data unreadable to others without having the decrypt key, which returns the encrypted data to its original context.
Within a blockchain, the individual can view the cryptocurrency transaction in detail. Moreover, this gives you complete transparency to all cryptocurrency and blockchain transactions conducted on the public blockchain. However, it’s not the same story on a private blockchain because access is limited and only available to those with a private key.
Persistent storage in the blockchain
Once a transaction is conducted on a blockchain, it can never be adjusted, deleted, or canceled. All the existing data remains unchanged. For example, if you buy something using Bitcoin or any other cryptocurrency, the entire transaction is already committed to the blockchain and can’t be reverted.
A downside is that your cryptocurrencies can even get stolen or illegally transferred. Therefore, it’s never possible to revert these transactions.
Especially when you are dealing with blockchains and cryptocurrencies, you need to consider using data mapping. Data mapping involves taking a set of data and mapping out its destination. Most organizations do this to make their data much more structured and accessible for their customers and internal team. Data mapping identifies personal and non-personal information within the system and gathers it into one place so you can easily track and protect it.
Data mapping isn’t a requirement imposed by data privacy regulators but is an excellent way to respond to data subject access requests (DSARs) and create records of processing activities (RoPAs).
In other words, data mapping is the roadmap to data compliance. Through your data mapping guide, you can continue further and build the rest. Understanding the data you are trying to collect within multiple databases and systems is always important.
Think of it this way, a blockchain is much more complicated, so the last thing you want to happen is not knowing where your data is. If you don’t know about this, you won’t know about the threats and opportunities.
Mainly because you are in the crypto industry and transactions can’t be reverted, it’s even more important to conduct a privacy audit regularly to identify the key risks associated with consumer data and how to eliminate them.
For instance, the GDPR asks you to confirm how data is transferred outside EU boundaries. With a website, it might not be too difficult to do so, but when it comes to cryptocurrencies, the story is more complex because nobody controls the blockchain’s host nodes. Overall, they can be located anywhere around the world.
The GDPR and other privacy regulators claim that data privacy can be maintained by deleting unnecessary data, but it’s different in the case of a blockchain.
How to remain compliant with privacy policies when dealing with cryptocurrencies
Privacy policies like the GDPR, CPRA, and others will affect what can be stored on the Blockchain. According to most privacy regulators, personal data shouldn’t be written to the Blockchain because they can’t be adjusted or erased after they’ve been written. Organizations creating cryptocurrency marketing policies should set up compliant policies (depending on where they live) and ensure they follow the procedures.
Additionally, it’s never a bad idea to generate privacy policies either for doing so. Finding a solution to remaining compliant with privacy policies is not to store any personal data on the blockchain because you won’t ever be able to adjust or delete the data after. Instead, store personal data externally on the blockchain.
Furthermore, we know the differences between blockchains and privacy policies, but there are many solutions you can use to remain compliant:
- Consider using a software system that stores all transactional data within the blockchain.
- Your organization must comply with its local privacy regulator and the GDPR or CPRA (depending on your location). All personal information related to cryptocurrency transactions should be stored outside the blockchain but carefully monitored and highly secure.
- When using a software system to remain compliant with privacy regulators, the process starts with the software system sending a request for personal data. After the request is sent, it must be verified to view the data. Once the request is valid and verified, you’ll receive an authorization key from the software to access the data offline.
- The link granted by the software allows it to update personal information and delete it once requested, ensuring that it maintains compliance with privacy regulators. Especially when you are dealing with blockchain transactions, this is vital because you can’t erase the data, but the software allows you to find a solution.
- Regarding blockchain and crypto transactions, the software system can verify the data isn’t corrupted by comparing both the hash values of retrieved data and values provided by the blockchain. If both hash values match, the data privacy is confirmed valid and isn’t corrupted.
Conduct a privacy audit
Before you go any further, read more about your local data privacy regulators and larger ones like the GDPR and CPRA. In order to conduct an effective privacy audit, you should clarify the following:
- Know the individual’s rights: Even though data can’t be deleted or altered in the blockchain, you need to know what kind of rights individuals have. The software system will store all transactional and sensitive data within the blockchain. This software system allows users to delete or access their data. However, the software system can’t access the data without sending a request and the authorization key.
- Brech management: You need to always have a backup plan in case a data breach occurs, but this is even more difficult to happen with cryptocurrencies. It’s not impossible, but highly unlikely. However, when dealing with cryptocurrencies, you want to ensure that the platform you are buying and selling cryptocurrencies is secure. It’s all about the platform and if it’s not widely used and has a bad history, it’s best to stay away from it. The most popular platforms used for buying and selling cryptocurrencies are Binance, Coinbase, Crypto.com, and Gemini.
- Data consent: Under privacy regulators, the consent should always be valid and up to date. Data privacy regulators like the GDPR also have additional consent requirements for children’s data processing.
The risk of not complying with data privacy regulators
You may think that because you are in the crypto industry and because data and transactions are more anonymous, it might not be necessary to comply with data privacy regulations. However, all industries, including crypto, must comply with data privacy laws. Those who don’t will have to face large fines if they aren’t compliant.
The only time you can get away with this is if the personal data stored on the blockchain is highly anonymized, which is very difficult to achieve. Otherwise, all the storage and process of the data must comply with data privacy regulations.
Why should you remain compliant with data privacy regulations even though blockchains are anonymous?
We know that you can’t delete or alter data in a blockchain, but that never means you don’t need to stay compliant. For example, if you do business, it involves collecting and storing data. This also happens in the crypto industry because people use cryptocurrencies to make purchases and when a transaction is performed, it always gathers sensitive data.
We mentioned before that the personal data stored within a blockchain needs to be hidden entirely so you do not have to comply with data privacy policies. Otherwise, it’s always mandatory and we dove deep into what needs to be done for you to remain compliant and avoid any fines.
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Disclaimer: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic’s opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.