idnits 2.17.1 draft-vcgtf-crypto-assets-security-considerations-05.txt: Checking boilerplate required by RFC 5378 and the IETF Trust (see https://trustee.ietf.org/license-info): ---------------------------------------------------------------------------- No issues found here. Checking nits according to https://www.ietf.org/id-info/1id-guidelines.txt: ---------------------------------------------------------------------------- No issues found here. Checking nits according to https://www.ietf.org/id-info/checklist : ---------------------------------------------------------------------------- No issues found here. Miscellaneous warnings: ---------------------------------------------------------------------------- == The copyright year in the IETF Trust and authors Copyright Line does not match the current year == Using lowercase 'not' together with uppercase 'MUST', 'SHALL', 'SHOULD', or 'RECOMMENDED' is not an accepted usage according to RFC 2119. Please use uppercase 'NOT' together with RFC 2119 keywords (if that is what you mean). Found 'MUST not' in this paragraph: o MUST not use hardware obtained through the untrusted procurement route. -- The document date (November 4, 2019) is 1633 days in the past. Is this intentional? Checking references for intended status: Informational ---------------------------------------------------------------------------- -- Looks like a reference, but probably isn't: '1' on line 2152 == Outdated reference: A later version (-07) exists of draft-nakajima-crypto-asset-terminology-02 Summary: 0 errors (**), 0 flaws (~~), 3 warnings (==), 2 comments (--). Run idnits with the --verbose option for more detailed information about the items above. -------------------------------------------------------------------------------- 2 Network Working Group M. Sato 3 Internet-Draft M. Shimaoka 4 Intended status: Informational SECOM IS Lab. 5 Expires: May 7, 2020 H. Nakajima, Ed. 6 Mercari R4D 7 November 4, 2019 9 General Security Considerations for Cryptoassets Custodians 10 draft-vcgtf-crypto-assets-security-considerations-05 12 Abstract 14 This document discusses the technical and operational risks of 15 cryptoassets custodians and its security controls to avoid the 16 unintended transactions for its customers. 18 Status of This Memo 20 This Internet-Draft is submitted in full conformance with the 21 provisions of BCP 78 and BCP 79. 23 Internet-Drafts are working documents of the Internet Engineering 24 Task Force (IETF). Note that other groups may also distribute 25 working documents as Internet-Drafts. The list of current Internet- 26 Drafts is at https://datatracker.ietf.org/drafts/current/. 28 Internet-Drafts are draft documents valid for a maximum of six months 29 and may be updated, replaced, or obsoleted by other documents at any 30 time. It is inappropriate to use Internet-Drafts as reference 31 material or to cite them other than as "work in progress." 33 This Internet-Draft will expire on May 7, 2020. 35 Copyright Notice 37 Copyright (c) 2019 IETF Trust and the persons identified as the 38 document authors. All rights reserved. 40 This document is subject to BCP 78 and the IETF Trust's Legal 41 Provisions Relating to IETF Documents 42 (https://trustee.ietf.org/license-info) in effect on the date of 43 publication of this document. Please review these documents 44 carefully, as they describe your rights and restrictions with respect 45 to this document. Code Components extracted from this document must 46 include Simplified BSD License text as described in Section 4.e of 47 the Trust Legal Provisions and are provided without warranty as 48 described in the Simplified BSD License. 50 Table of Contents 52 1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . 3 53 2. Scope of this document . . . . . . . . . . . . . . . . . . . 4 54 3. Conventions and Definitions . . . . . . . . . . . . . . . . . 4 55 4. Terminology . . . . . . . . . . . . . . . . . . . . . . . . . 4 56 5. Basic description of a model system of a cryptoassets 57 custodian . . . . . . . . . . . . . . . . . . . . . . . . . . 5 58 5.1. General . . . . . . . . . . . . . . . . . . . . . . . . . 5 59 5.2. A basic model of cryptoassets custodians system and its 60 functional components . . . . . . . . . . . . . . . . . . 5 61 5.3. The flow leading to the sending of the transaction . . . 7 62 5.4. Types of keys that are used for signature and encryption 8 63 5.4.1. Type of keys . . . . . . . . . . . . . . . . . . . . 8 64 5.4.2. Flow for the key generation and key usage . . . . . . 8 65 5.4.3. On the use of multiple keys . . . . . . . . . . . . . 10 66 5.4.4. On the suspension of keys . . . . . . . . . . . . . . 10 67 5.5. Characteristics of cryptoassets in blockchain and 68 distributed ledger . . . . . . . . . . . . . . . . . . . 10 69 5.5.1. About this section . . . . . . . . . . . . . . . . . 10 70 5.5.2. Importance of signature keys . . . . . . . . . . . . 11 71 5.5.3. Diversity of implementations . . . . . . . . . . . . 11 72 5.5.4. Possibility of blockchain forks . . . . . . . . . . . 12 73 5.5.5. Risks for Unauthorized Transactions . . . . . . . . . 13 74 6. Risks of cryptoassets custodian . . . . . . . . . . . . . . . 14 75 6.1. About this chapter . . . . . . . . . . . . . . . . . . . 14 76 6.2. Risks of cryptoassets custodian system . . . . . . . . . 14 77 6.2.1. Risks related to signature keys . . . . . . . . . . . 15 78 6.2.2. Risks related to assets data . . . . . . . . . . . . 21 79 6.2.3. Risks of suspension on system and operation . . . . . 22 80 6.3. Risks from external factors . . . . . . . . . . . . . . . 23 81 6.3.1. Risks related to the Internet, Web PKI, and users 82 environment . . . . . . . . . . . . . . . . . . . . . 23 83 6.3.2. Risks related to cryptocurrency blockchain . . . . . 24 84 6.3.3. Risks from external reputation . . . . . . . . . . . 25 85 7. Considerations of security controls on Cryptoassets 86 Custodians . . . . . . . . . . . . . . . . . . . . . . . . . 26 87 7.1. General . . . . . . . . . . . . . . . . . . . . . . . . . 26 88 7.2. Basis for consideration about security management . . . . 27 89 7.3. Considerations about security controls on Cryptoassets 90 custodians . . . . . . . . . . . . . . . . . . . . . . . 27 91 7.3.1. Information security policies . . . . . . . . . . . . 28 92 7.3.2. Organization of information security . . . . . . . . 28 93 7.3.3. Human resource security . . . . . . . . . . . . . . . 28 94 7.3.4. Asset management . . . . . . . . . . . . . . . . . . 28 95 7.3.5. Access control . . . . . . . . . . . . . . . . . . . 29 96 7.3.6. Security controls on signature keys . . . . . . . . . 31 97 7.3.7. Physical and environmental security . . . . . . . . . 36 98 7.3.8. Operations security . . . . . . . . . . . . . . . . . 37 99 7.3.9. Communications security . . . . . . . . . . . . . . . 39 100 7.3.10. Supplier relationships . . . . . . . . . . . . . . . 42 101 7.3.11. Information security incident management . . . . . . 42 102 7.3.12. Information security aspect of business continuity 103 management . . . . . . . . . . . . . . . . . . . . . 42 104 7.3.13. Compliance . . . . . . . . . . . . . . . . . . . . . 44 105 7.4. Other cryptoassets custodians system specific issues . . 44 106 7.4.1. Advance notice to user for maintenance . . . . . . . 44 107 8. Future work . . . . . . . . . . . . . . . . . . . . . . . . . 44 108 9. Security Considerations . . . . . . . . . . . . . . . . . . . 44 109 10. IANA Considerations . . . . . . . . . . . . . . . . . . . . . 44 110 11. References . . . . . . . . . . . . . . . . . . . . . . . . . 44 111 11.1. Normative References . . . . . . . . . . . . . . . . . . 44 112 11.2. Informative References . . . . . . . . . . . . . . . . . 45 113 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . 46 114 Authors' Addresses . . . . . . . . . . . . . . . . . . . . . . . 46 116 1. Introduction 118 This document gives guidance as to what security measure should the 119 cryptoassets custodians consider and implement to protect the asset 120 of its customers. The management of the signature key for 121 cryptoassets especially has different aspects than other types of 122 information systems and requires special attention. 124 This document reports especially on the appropriate management of the 125 signature key by the cryptoassets custodians to avoid the unintended 126 transactions for its customers. 128 The document organizes recommendations for considering security as a 129 purpose of protecting users' assets by operators of cryptoassets 130 custodians. Among the assets to be protected, in particular, the 131 signature key of the cryptoassets has a different characteristic from 132 the conventional information system and needs attention. Particular 133 emphasis is given to points that should be kept in mind for the 134 cryptoassets custodians to properly manage the signature key and to 135 prevent illegal transactions that the customer does not intend. 137 The basic model of the cryptoassets custodians system covered in this 138 document is shown in Section 5. A system in a form different from 139 this basic model, for example, a system where an operator manages a 140 signature key provided by a user (e.g. online wallet), is handled in 141 another complementary document or later revision of this document. 143 2. Scope of this document 145 An operator covered by this document is a cryptoassets custodian that 146 manages the signature key used in the cryptoassets. Including the 147 case where the management of the signature key is entrusted to 148 another custodians operator. In that case, even for operators 149 entrusted with the management of signature key, a considerable part 150 of the recommendation indicated in this document is considered to 151 apply. 153 This document includes considerations on threats and risks for the 154 following subjects. 156 o A cryptoassets custodians system that provides cryptoassets 157 custodians work to customers (consumers and other exchanges) 159 o Assets information managed by the cryptoassets custodians system 160 (including the signature key of the cryptoassets) 162 o The social impact which can be exerted by imperfect security 163 measures of the cryptoassets custodians system 165 This document does not focus on the following items. 167 o Security measures for information systems used by daily operations 168 by custodians operators 170 o Security measures against blockchains that provide the mechanism 171 of cryptoassets and distributed ledger itself 173 o Operator's own management risk 175 o Specific requirements on separation of assets of customers and 176 custodians/exchanges 178 3. Conventions and Definitions 180 The key words "MUST", "MUST NOT", "REQUIRED", "SHALL", "SHALL NOT", 181 "SHOULD", "SHOULD NOT", "RECOMMENDED", "NOT RECOMMENDED", "MAY", and 182 "OPTIONAL" in this document are to be interpreted as described in 183 BCP 14 [RFC2119] [RFC8174] when, and only when, they appear in all 184 capitals, as shown here. 186 4. Terminology 188 Terms used in this document are defined in 189 [I-D.nakajima-crypto-asset-terminology] 191 5. Basic description of a model system of a cryptoassets custodian 193 5.1. General 195 In this section, a model of a cryptoassets custodians system that is 196 used to explain the concepts and provisions in this document are 197 explained. 199 5.2. A basic model of cryptoassets custodians system and its functional 200 components 202 Followings are the basic model of a crypto assets custodian that this 203 document deals with. A basic model of cryptoassets custodians system 204 is shown on Figure 1. 206 Figure 1: Basic Model of Cryptoassets Custodians system 208 o Interface (Web Application, APIs) Provides screen and input 209 functions such as login process, account management (deposit/ 210 withdrawal instruction etc.) and trade instruction for the 211 customers(users). Web application, API, etc. 213 o Customer Authentication Function Performs user authentication 214 process for login to the cryptoassets custodians. 216 o Customer Credentials Manages required IDs for login and 217 verification information related to user authentication process 218 (e.g. password verification info.). 220 o Customer Assets Management Function A group of functions to manage 221 customer accounts. Receive instructions for deposit or withdrawal 222 (outgoing coins) and perform processing according to the user 223 instructions. Retrieve or update assets data. 225 o Blockchain Node Connects to another blockchain nodes to retrieve 226 blockchain data. 228 o Incoming Coin management Function Checks transaction stored in 229 blockchain and confirm whether incoming coins are involved in the 230 specified addresses. Update an assets database according to the 231 transaction from blockchain. 233 o Order processing function A group of functions that receives 234 orders from customers and performs processing related to trading 235 of cryptoassets. Retrieves and updates assets data based on the 236 orders. 238 o Assets Database Manages holdings of fiat currencies and 239 cryptoassets. The database does not include the private keys for 240 transaction signature. Assets are managed separately from the 241 assets of the custodian for each customer. 243 o Transaction Singing Function 245 * Transaction Generator Generates transactions to be sent to the 246 blockchain based on instructions from the customer asset 247 management function or the custodians operation function. 249 * Transaction Broadcaster Broadcasts the signed transaction to 250 the blockchain. Connects to other nodes on the blockchain. 252 * Transaction Signing Function Generates digital signatures based 253 on the instructed transaction contents and the signature key 254 (or its IDs and its addresses). 256 * Address Management Manages public keys with related to the 257 signature keys, or addresses (such as values calculated from 258 the public keys). 260 * Signature Key Management Function Manages the signature keys of 261 the cryptoassets (keys used for signing the transaction). 262 Sometimes signature keys are separately stored into the cold- 263 wallet as security countermeasure. 265 * Signature key generator Generates signature keys. The 266 generated keys are registered in the signature key management 267 function, and the public keys and addresses are registered in 268 the address management function. 270 o Custodians Operation Modules A group of functions for custodians' 271 operators or administrators. Based on operations from 272 administrators, the module instructs generating new signature keys 273 or transferring cryptoassets. 275 o Operator Authentication Function Authenticates the administrators. 277 o Operator Audit Database Manages auditing data related to the 278 authentication of the administrators. 280 We defined each functional element to distinguish functions 281 logically, and do not show the actual arrangement on the actual 282 system. For example, in our actual system, the address management 283 unit may be managed by an integrated database. Also, there are 284 implementations with multiple functions packaged together. For 285 example, each functional element of the transaction signature system 286 may be integrated with the customer property management system, or 287 the transaction signature system may be operating as another system. 289 When using existing implementations such as bitcoin wallet, bitcoin 290 wallet is thought to provide the functions of the transaction 291 signature system as just one implementation as a whole. It is also 292 conceivable that some functions are provided by a remote 293 subcontractor as in a form in which the function of the transaction 294 signature system is provided by a remote server. 296 5.3. The flow leading to the sending of the transaction 298 o Deposit Phase 300 1. Customers send fiat to custodian's bank account. 302 2. Custodians shall confirm to receive fiat, and shall update 303 assets database to reflect customer asset information. 305 o Input coin phase 307 1. Customer transfer cryptoassets to the address instructed by 308 custodians. The transfer shall be made by cryptoassets wallet 309 for the customer such as tools or services (other custodians 310 or Web wallet) 312 2. Custodians shall confirm cryptoassets has been transferred to 313 the address instructed and shall update the asset database to 314 reflect asset information of the customer. 316 o Trading phase 318 1. Customer access to interfaces to make instructions. 320 2. Instructions to transfer shall be processed by custodians 321 operations functions. The result of trade processed by 322 custodians operations functions shall be updated into the 323 asset database. 325 o Instructions to output coins from customers 327 1. Customers access to interface and instruct it to transfer its 328 cryptoassets to other address. (Instruct to output coins) 330 2. Instructions to output coins shall be processed by customer 331 assets management functions. Transaction generator shall make 332 transaction messages based on instructions such as receive 333 address or amount of cryptoassets. 335 3. Transaction messages shall be added a digital signature by 336 transaction signing functions. 338 4. Transaction messages with a digital signature shall be 339 delivered to all nodes on blockchain by transaction 340 broadcaster. 342 o Instruction to transfer from Customer Assets Management Function 344 1. Administrator instructs to send cryptoassets to address 345 through the interface of Management Functions. For Example, 346 it may send between address managed inside custodians. 348 2. Instructions to transfer shall be processed on Management 349 Function, and shall be processed as described 2 to 4 on 350 "output coin". Transactions with digital signature shall be 351 delivered to all nodes on blockchain. 353 5.4. Types of keys that are used for signature and encryption 355 5.4.1. Type of keys 357 +-----------------------+-------------------------------------------+ 358 | Types | Description | 359 +-----------------------+-------------------------------------------+ 360 | Signature Key | A private key for signing transactions | 361 | | (asymmetric key cryptography) | 362 | Verification Key | A public key for verification of | 363 | | transactions (asymmetric key | 364 | | cryptography). Recipient address of | 365 | | transactions are the unique value | 366 | | calculated from verification key | 367 | Encryption/decryption | Secret key used to keep signature key | 368 | key for signature key | (symmetric key cryptography) confidential | 369 | | / protected | 370 | Master Seed | A seed, e.g. random number, to generate a | 371 | | signature key in deterministic wallet | 372 +-----------------------+-------------------------------------------+ 374 Table 1: Type of keys 376 5.4.2. Flow for the key generation and key usage 378 Figure 2: Lifecycle of signature key, verification key and 379 encryption/decryption key for signature key 381 After a pair of keys (signature & verification, hereafter "key pair") 382 is generated, an addressed to receive transaction is derived from the 383 verification key. By providing a sender of digital assets this 384 address, the sender is able to transfer one or more assets to this 385 address. When the recipient transfers the assets to another address, 386 the original recipient signs the transaction data which includes the 387 transfer order. 389 A signature key is considered to be in an inactive state when it is 390 stored in a confidential manner (ie. cannot be directly used to 391 sign), for example within the key management function in Figure 1. 392 An example of how to set a signature key in an inactive state is to 393 encrypt the signature key using an encryption key (ie. passphrase). 395 The opposite process of decrypting the signature key will return the 396 key inactive state. The activation of a key is assumed to be 397 executed within the transaction signing function in Figure 1. 399 Activation and deactivation of keys is part of the function set of 400 certain wallets. 402 The signature key is not needed after its generation until a 403 transaction has to be signed. Therefore this allows for the store 404 and manages signature keys offline while keeping the verification key 405 and addresses online (See: Section 7.3.6.2). 407 Figure 3: Lifecycle of signature key, verification key and 408 encryption/decryption key for signature key in case of deterministic 409 wallet 411 The deterministic wallet is a mechanism that generates one master 412 seed and generates multiple signature key pairs from that master 413 seed. It is possible to regenerate each signature key pair from the 414 master seed by backing up the master seed and restoring it. On the 415 other hand, if the master seed is stolen, the crypto assets which are 416 managed by all signature key pairs (and addresses) derived from the 417 master seed may be stolen. Also, if the master seed is lost, all 418 signature key pairs will not be able to be regenerated. 420 As an extension of the deterministic wallet, there is a hierarchical 421 deterministic wallet (HD wallet). In the case of HD wallet, a master 422 key pair is created from the master seed, and child key pairs are 423 derived from the master key pair. Furthermore, descendant key pairs 424 can be derived from the child key pairs in a hierarchical manner. 425 Since the child key pair can be created from the parent key pair, it 426 is not necessary to access the master seed when generating the child 427 key pair. The implementation of hierarchical key pair generation 428 depends on the signature algorithm, and some currencies cannot be 429 realized in principle. Although this document refers mainly to the 430 management of the signature keys in the security control measures, 431 the master seed also needs security management equal to or higher 432 than the signature keys. 434 5.4.3. On the use of multiple keys 436 There are some cases to use cryptoassets where one user uses one 437 address, one user uses multiple addresses. The number of addresses 438 and pairs depends on the number of cryptassets and method of 439 management. For example, cryptoassets that can contain tags related 440 to the transaction such as Ripple and NEM, cryptoassets custodian may 441 distinguish customers by each tag if custodian uses one address. On 442 the other hand, cryptoassets that cannot contain any tags for 443 transactions, custodians have to make addresses for each customer, so 444 the number of addresses and key pairs would be increased. It is 445 considered to use multiple addresses and key pairs by risk evaluation 446 with not only a variety of cryptoassets (e.g., Bitcoin, Ethereum, 447 etc.) but also management by the hot wallet and cold wallet. 449 It is recommended not to reuse key pair for general. But it is 450 focussed for anonymous transactions by private use, so this is not 451 suitable for custodians from viewpoint of efficiency and 452 practicality. Cryptoassets custodians shall make effective controls 453 considered by risk evaluations and control objective. 455 5.4.4. On the suspension of keys 457 Even if Figure 2 indicates operations on operations of custodian, 458 cancellation of transaction cannot be made for cryptoassets. Also, 459 it is difficult to revoke the signature key after suspension of using 460 keys. For example, it may happen to input coins to the address user 461 has suspended to use. To return coins to the sender, custodian needs 462 a signature key for the suspended address. cryptoassets custodians 463 shall assume those cases, and shall consider about revoking signature 464 keys carefully. 466 5.5. Characteristics of cryptoassets in blockchain and distributed 467 ledger 469 5.5.1. About this section 471 In the handling of cryptoassets using blockchain / distributed 472 ledger, there are things to emphasize and different characteristics 473 compared with general information systems and usages of private/ 474 encryption keys. In considering the risk assessment described in 475 Section 6 and the security requirements and measures based thereon, 476 it is necessary to pay attention to these characteristics. 478 5.5.2. Importance of signature keys 480 As described in Section 5.3, by signing transactions using the 481 signature keys, it is possible to instruct the transfer of the values 482 of cryptoassets to other addresses. Once this transaction is written 483 to the block or ledger data and the transfer of the values of 484 cryptoassets is approved it is difficult to revert it or to 485 invalidate the transfer by revocation procedure etc. This property 486 is in contrast to taking time until the remittance gets caught or the 487 process can be canceled during remittance and be reassembled, even if 488 it requires complicated administrative procedures in the process of 489 remittance, and illegal remittances occur. In addition, when the 490 private signature keys have vanished in the cryptoasset scheme, there 491 will be a case that the cryptoasset held by the address corresponding 492 to the signature private key is impossible to transfer to the other. 493 In cryptoassets having such irreversible nature, it must pay 494 attention to the theft, fraudulent use and disappearance of the 495 signature secret key. 497 5.5.3. Diversity of implementations 499 There are various cryptoassets including Bitcoin. The specifications 500 also vary widely from cryptoassets to cryptoassets. For example, 501 there are differences in the using of encryption algorithms, hash 502 functions, the methods of generating/spreading transactions, and 503 wallet implementations to protect the signature key(s), and so on. 504 Due to these differences in specifications, effective countermeasures 505 for a specific cryptoasset may not be able to be carried out under 506 the specification of another cryptoassets. And also, from the 507 current feaver trends of the cryptoassets, the appearance of new 508 cryptoassets and the speed of functional expansion and specification 509 change of existing cryptoassets mechanisms are very fast. 511 5.5.3.1. Cryptographic algorithm of cryptoassets 513 There are cases that new cryptographic algorithms in cryptoassets 514 that are not sufficiently reviewed for security may be adopted. In 515 ordinary use cases of cryptography technology, designers often use 516 cryptographic algorithms that are scientifically verified, 517 mathematically proved secure, and approved by official authorities/ 518 agencies, however, cryptoassets designers are often adopting 519 "immature and unverified" cryptographic algorithms. This means that 520 it takes time to archive provable security for algorithms and approve 521 by official authorities/agencies, while in the blockchain where 522 competition and evolution are remarkable, the maturity level is low 523 as technology, and differentiation and blocking from other 524 cryptoassets. It must be optimized the technology specific to the 525 chain. These algorithms are likely to have no properly reviewed 526 implementation, or the risk of a vulnerability being discovered later 527 and compromising (compared to mature algorithms) is high. 529 5.5.4. Possibility of blockchain forks 531 In the blockchain using Proof-of-Work and the like typified by 532 bitcoins, a state such as a temporary fork of a chain due to 533 specification change of software or a single chain of branched chains 534 (re-organization) can arise. Also, as another case, due to the 535 division of the developer community, blockchains are divided from the 536 point of time and sometimes operated as separate cryptoassets. In 537 the real world, there are various forks, it may be difficult to 538 respond to all of them, and it should be consider countermeasures 539 according to the risks. 541 5.5.4.1. Rolling back due to re-organization 543 If the chain is discarded due to a reorganization, the history of 544 transactions contained in the discarded chain will be lost. In that 545 case, the transaction on the block discarded within the 546 reorganization period may not be reflected in the main-chain. 548 5.5.4.2. Handling forks of cryptoassets 550 As in the case of bitcoins and ether symbols, blockchains are divided 551 and sometimes managed as another cryptoassets (here, called a fork 552 coin). The fork coin is also derived from the same software as the 553 original cryptoassets and uses the same technology and compatible 554 technology (A description that incorporates the case where different 555 technologies are adopted for a fork is necessary). In addition, the 556 chain until just before splitting has exact identical data. By using 557 its functionality, it becomes possible to attack, for example, replay 558 attacks. A replay attack is an attack in which transactions used in 559 the original cryptoassets are retransmitted to the sender of the 560 transaction at the fork coin chain and the fork coin is illegally 561 acquired as a result. In this kind of replay attacks, 562 countermeasures such as monitoring of the transaction sender, for 563 fork coin chain, measures to be sent before transactions that return 564 coins to their own other address are required. 566 In addition, if a fork coin occurs in the cryptoassets held by the 567 exchanger, there is also a problem that the fork coin is not returned 568 to the user unless the fork coin is assigned to the user of the 569 exchanger in the exchange system. 571 5.5.5. Risks for Unauthorized Transactions 573 5.5.5.1. About this section 575 Just by sending the transaction instructing the transfer of the 576 coins(assets) to the node of the blockchain does not instantly 577 reflect the cryptoassets transfer. In order for a transaction to be 578 approved, it is stored in a block created every decided period and 579 needs to be accepted by the majority of mining nodes. It may be 580 difficult to confirm that the transaction has been approved for the 581 following reasons. 583 5.5.5.2. Handling unapproved transactions 585 In a cryptasset using a distributed ledger, there are a variety of 586 cryptoassets (such as Bitcoin, Ethereum, etc.) that the transaction 587 sender sends transactions with a transaction fee. This transaction 588 fee is acquired by the miner who creates the block, and the higher 589 the transaction cost, It is easy to store in blocks (transactions are 590 easily approved immediately). If the cost of the transaction sent 591 from the cryptoassets custodian to the blockchain is low, it may take 592 times to approve the transaction, or there is a possibility that the 593 time will expire without being approved. Besides the case due to the 594 transaction fee, the temporary chain fork as in Section 5.5.4.1 can 595 be occurred that the transaction that should have been approved once 596 becomes the unapproved state and the dual spend of cryptoassets. In 597 usage scenes where cryptoassets transfer is required immediately, 598 such as payments in real stores, it may be difficult to take time to 599 confirm the approval of the transaction, and it is necessary to 600 assume the risk of unauthorized transactions. 602 5.5.5.3. Transaction failure due to vulnerabilities from cryptoassets 603 specifications and implementations 605 Although it is not exactly the case of unauthorized transactions, 606 there was a vulnerability called transaction malleability as a past 607 case of bitcoins. With this vulnerability, if the node relaying the 608 transaction is malicious, it is also possible to make transactions 609 illegally manipulate, thereby making it impossible to find the 610 transaction stored in the block (make it impossible to search by 611 transaction ID). There is also the possibility of an attack that 612 makes a duplicate by requesting transmission of the cryptoassets 613 again from the counterparty by making the approved transaction appear 614 as not approved. This attack is performed after sending the 615 transaction to the nodes, so it is characteristic that the sender can 616 not take measures beforehand before sending. Regarding transaction 617 malleability, it is now possible to avoid it by using SegWit in 618 bitcoins. However, as a lesson from this case, effective defense 619 measures cannot be made effective only with the cryptoassets 620 custodian that becomes the sender or receiver of the cryptoassets 621 with respect to faults and threats due to another vulnerability of 622 bitcoins and other cryptoassets. 624 6. Risks of cryptoassets custodian 626 6.1. About this chapter 628 Below in this section, some risks custodian shall consider for the 629 system and for foreign factor outside of control from custodian such 630 as blockchain is described. The risks for systems in custodians are 631 listed as a threat, factor, and actor may cause threat. The risks 632 for foreign factor outside of control from custodian such as 633 blockchain are listed from the incident. Some risks may be caused by 634 property or quality described in Section 5.5. 636 On the other hand, there are some risks based on operations or 637 systems implemented by each custodians. Custodians shall pick up 638 risks to deal with control to refer these risks with understanding 639 with system or operation of custodian. Custodians shall evaluate 640 impacts may be affected by risks and shall decide controls and its 641 priority. 643 6.2. Risks of cryptoassets custodian system 645 In this section, major risks regarding information asset which 646 cryptoassets custodian system holds are listed. Among the 647 fundamental model shown in Section 5, the signature key and asset 648 data are focused as significant information asset to protect 649 customers asset. 651 The attacker may be able to broadcast a malicious transaction to 652 nodes of distributed-ledger after generating the transaction if the 653 signature key and surrounding environment are not safe. 655 Withdrawing transaction is almost impossible once the malicious 656 transaction has been broadcasted and built into the blockchain. 657 Therefore, prior countermeasures to prevent generating malicious 658 transaction are essential. 660 Moreover, consideration of a loss of signature key is also essential. 661 Cryptoassets stored in the address associated with the signature key 662 become unavailable in a case where the signature key has been lost. 664 Risk regarding the signature key including the signature key and 665 surrounding environment are mentioned in Section 6.2.1 based on 666 Figure 1. 668 In this document, the model is described as more abstract as the 669 content of data, data format, management model or details of 670 processing regarding asset data varies among custodians. Record such 671 as client assets (both cryptoassets and fiat currency), assets of 672 custodians(both cryptoassets and fiat currency), clients' account 673 information, or address of cryptoassets is listed as common content 674 of asset data subject to protection. Manipulation to those asset 675 data caused by the attacker results in damage to client assets or 676 affect to the custodians' operation. Risks related to assets data 677 are discussed in Section 6.2.2. 679 Risks of system outage MUST be considered concerning availability 680 which allows clients to control their assets in addition to the 681 protection of important information such as the signature key or 682 assets data. Risks of system control are discussed in 683 Section 6.2.3.2. 685 In addition to information or risks mentioned in this section, system 686 specific risks varied among cryptoassets custodian or risks regarding 687 external contractor MUST be considered. Detailed risk analysis MUST 688 be performed against the actual system of the cryptoassets custodian. 690 6.2.1. Risks related to signature keys 692 Both role and risks of signature keys are extremely large on 693 cryptoasset exchange. Signature keys enable to transfer coins, but 694 it comes from properties of difficulties for revocation of lost, 695 leakage, stolen, and rollback transaction. Some risks about 696 signature keys are listed in this section. In addition, risks about 697 supply chain related to risks install wallets handles signature keys. 699 6.2.1.1. Risk analysis related to signature key 701 Risk analysis may depend on threats assumption, the structure of the 702 system, and threats model, the results for each custodians shall be 703 different. Some case studies are described in this section. 705 Threats for signature keys and its actors are assumed as listed 706 below. And actors are assumed as the input of signature key in 707 Figure 1. 709 o Threats: 711 * Loss 713 * Leakage, Theft 715 * Unauthorized Use 717 o Factors of Threats: 719 * Error in operation 721 * Maliciousness (of legitimate person) 723 * Spoofing (for legitimate person)) 725 * Malicious intentions of outsiders 727 * Unintended behavior (system) 729 o Actors: 731 * Custodians operation modules 733 * Transaction Signing modules 735 * Customer assets management function 737 * Incoming Coin management function 739 Factors of threats are organized as follow. 741 Error in operation: A human error caused by an authorized user 742 (including an administrator) during operation of the system. For 743 example, the expected operation was to withdraw coin equivalent to 744 100,000 JPY. But, the actual operation is withdrawing coin 745 equivalent to 1,000,000 JPY. 747 Malicious acts by authorized person: An act committed with malice by 748 an authorized person (including an administrator). For example, 749 theft or unauthorized use of the signature key by the insider. 750 Purpose or incentive of the act is not concerned. 752 Spoofing(of authorized person): Impersonation with a stolen 753 credential of an authorized person. For example, the order to 754 sell/buy/transfer cryptoassets by an external attacker impersonating 755 a client; the malicious order of transfer or generation/signing of a 756 transaction through access to the system with the legitimate 757 operator/administrator credential by an unauthorized insider. 758 Especially, theft and abuse of credential upon an account 759 registration by impersonating a legitimate user MUST be considered. 760 Note: Impersonation which is not caused by theft of legitimate user/ 761 authorized person's credential (e.g., Privilege escalation) are 762 mentioned in "malicious acts by outsiders." 763 Malicious acts by outsiders: Access or operation to the system by 764 outsiders with malicious purpose excluding spoofing. (e.g., external 765 unauthorized access by exploiting a vulnerability; remote access to 766 the system which enables outsiders to operate to the signature key or 767 generate a transaction by a targetted attack to an administrator of 768 the custodians' system.) 770 Unintended behavior: An unintended behavior of the system regardless 771 of intention or malice. (e.g., leakage of the signature key caused by 772 bugs of the system, generation of a transaction including an 773 incorrect amount of assets regardless of operation.) 775 Theft and unauthorized use are threats that can only be caused by a 776 clear malicious factor. Risks to be considered as a result of 777 threats are listed in Table 2. Please note that theft and 778 unauthorized use could happen in a case where multiple factors such 779 as an error in operation or unintended behavior have occurred. (e.g., 780 insertion of backdoor that transmits a signature key or tampers a 781 signing order to the transaction in conjunction with a specific 782 legitimate operation.) This case can be covered in countermeasures 783 of theft or unauthorized use. 785 +---------------+-------------+-----+---------+-------+-------------+ 786 | Risk | Factor | Los | Leakage | Theft | Unauthorize | 787 | | | s | | | d Use | 788 +---------------+-------------+-----+---------+-------+-------------+ 789 | Illegal opera | End user's | Y | Y | Y | Y | 790 | tion(Route is | malicious | | | | | 791 | legitimate) | operation | | | | | 792 | | Malicious | Y | Y | Y | Y | 793 | | operation | | | | | 794 | | by the admi | | | | | 795 | | nistrator | | | | | 796 | | of customer | | | | | 797 | | assets | | | | | 798 | | management | | | | | 799 | | function | | | | | 800 | | Impersonati | Y | Y | Y | Y | 801 | | on to end | | | | | 802 | | users | | | | | 803 | | Insider imp | Y | Y | Y | Y | 804 | | ersonating | | | | | 805 | | an administ | | | | | 806 | | rator | | | | | 807 | Intrusion | Intrusion | Y | Y | Y | Y | 808 | from outside | into Tx | | | | | 809 | | signing | | | | | 810 | | function | | | | | 811 | | Intrusion | Y | Y | Y | Y | 812 | | into | | | | | 813 | | incoming | | | | | 814 | | coin | | | | | 815 | | management | | | | | 816 | | function | | | | | 817 | | Intrusion | Y | Y | Y | Y | 818 | | into | | | | | 819 | | customer | | | | | 820 | | asset | | | | | 821 | | management | | | | | 822 | | function | | | | | 823 | | Intrusion | Y | Y | Y | Y | 824 | | into | | | | | 825 | | custodian | | | | | 826 | | operation | | | | | 827 | | function | | | | | 828 | Incorrect | Unintended | Y | Y | - | - | 829 | behavior is | behaviors | | | | | 830 | different | of Tx | | | | | 831 | from | signing | | | | | 832 | operation | function | | | | | 833 | instruction | | | | | | 834 | | Unintended | Y | Y | - | - | 835 | | behaviors | | | | | 836 | | of incoming | | | | | 837 | | coin | | | | | 838 | | management | | | | | 839 | | function | | | | | 840 | | Unintended | Y | Y | - | - | 841 | | behaviors | | | | | 842 | | of customer | | | | | 843 | | asset | | | | | 844 | | management | | | | | 845 | | function | | | | | 846 | | Unintended | Y | Y | - | - | 847 | | behaviors | | | | | 848 | | of | | | | | 849 | | custodian | | | | | 850 | | operation | | | | | 851 | | function | | | | | 852 | Human error | Error in | Y | Y | - | - | 853 | | operation | | | | | 854 | | by end user | | | | | 855 | | Error in | Y | Y | - | - | 856 | | operation | | | | | 857 | | by administ | | | | | 858 | | rator of | | | | | 859 | | customer | | | | | 860 | | asset | | | | | 861 | | management | | | | | 862 | | function | | | | | 863 +---------------+-------------+-----+---------+-------+-------------+ 865 Table 2: List of possible risks for the signature key, Y means 866 applicable risk exists, - means no applicable risk exists 868 The following sections outline each risk. The control measures 869 corresponding to each risk are shown in Section 7.3. 871 6.2.1.2. Risk of loss of signature key 873 Risks listed below are an event which causes loss of the signature 874 key from a viewpoint of input to the signature key such as order or 875 operation. 877 As a typical event, the loss of the signature key caused by human 878 error in operation by the administrator of the custodians' system may 879 be considered. 881 6.2.1.3. Leakage and theft risk of signature key 883 In most case, theft is caused by the operation of a malicious person. 884 By contrast, leakage could happen by error or fault not requiring the 885 malice. Therefore, the risk of theft and the risk of leakage MUST be 886 separately considered. 888 The risks of leakage shown in Table 2 are lists of the event which 889 potentially causes leakage of the signature key including the leakage 890 caused by error/fault regarding the input to the signature key such 891 as an order or an operation. For example, an internal criminal, 892 unintentional behavior of the system and intrusion to the system. 894 Likewise, the risks of theft are lists of the event which potentially 895 causes the theft of the signature key by a malicious person. For 896 example, an internal criminal and intrusion to the system. 898 Regarding the leakage of sensitive information to the outside, both 899 leakage and theft are similar, and the countermeasures are the same. 900 The countermeasures are discussed in Section 7.3.6. 902 6.2.1.4. Risks of unauthorized use of the signature key 904 The risks of unauthorized use shown in Table 2 are lists of the event 905 which causes unauthorized use by a malicious person. For example, 906 spoofing of the authorized person and intrusion to the system. 908 Unauthorized use of the signature key could be caused by unauthorized 909 operation of pre-processes of an unsigned transaction at transaction 910 signing function in addition to the direct unauthorized use of the 911 signature key. Following example shows unauthorized use at an early 912 stage of the process. 914 o A destination address of cryptoassets or amount of assets is 915 manipulated due to tampering of software at transaction signing 916 function. The tamper disables designed validation process at the 917 transaction signing function. 919 o A destination address of cryptoassets or amount of assets is 920 manipulated due to tampering of the unsigned transaction generated 921 by transaction generator. Besides, an unauthorized transaction 922 has generated and given to the transaction signing function. 924 o A destination address of cryptoassets or amount of assets is 925 manipulated due to tampering of software at transaction generator. 926 An unsigned transaction has generated with an unauthorized direct 927 operation to transaction generator. 929 o An incorrect amount or incorrect destination address of 930 cryptoassets has transmitted from custodian operation function 931 through transaction generator due to an internal crime, error in 932 operation, or spoofing of the identity by the administrator. 934 o Assets database has tampered in a case where the operation/order 935 to transaction generator refers to the assets database. (See: 936 Section 6.2.2) 938 As shown in the above example, the attacker is able to obtain 939 cryptoassets without attacking to the signature key illicitly. In 940 particular, countermeasures MUST be considered in a case where the 941 system automates each process. 943 Security control measures to the signature key MUST be performed. 944 Moreover, security control measures to the entire custodian's system 945 MUST be performed against these complex risks. Security control 946 measures are discussed in Section 7. 948 6.2.1.5. Other risks 950 6.2.1.5.1. Supply chain risk of hardware wallet 952 Hardware-wallet is known to have a function to manage signature keys. 953 In most hardware-wallet, key administration is done on an 954 administrative terminal connecting via USB such as PC. 956 Cryptographic module validation program for products having a 957 cryptographic key management function such as FIPS 140-2 are 958 provided. However, most of the cryptographic algorithms used in 959 cryptoassets are not covered by those validation programs. 960 Therefore, third-party safety validation program subject to hardware- 961 wallet for cryptoassets is not well provided. For this reason, the 962 users of hardware-wallet MUST understand that safety level of the 963 hardware-wallet available at a market differs among the product. 965 Furthermore, the safety could be threatened by tampering the product 966 during distribution channel even though the product has a certain 967 level of safety in the factory. For example, hardware-wallet 968 tampered in a distribution channel to have a malware enables the 969 attacker to restore the signature key generated by a legitimate owner 970 without acquiring the hardware-wallet. 972 6.2.2. Risks related to assets data 974 Assets data is data to manage an amount of cryptoassets/fiat 975 currencies held by clients or custodian itself. The signature key 976 for transaction signing is not recorded in the assets data. (See: 977 Section 5.2) 979 As mentioned earlier, assets data differs among the custodians, an 980 abstracted model is used in this section. In this section, a brief 981 thought is given since detailed threat assessment and risk analysis 982 MUST be performed against assets data of the actual custodians' 983 system. 985 Major threats to the assets data are unauthorized manipulation, loss, 986 and leakage. The factors are an error in operation by the 987 administrator, malicious acts by the authorized person, spoofing of 988 the authorized person, malicious acts by outsiders, and unintended 989 behavior of the system. 991 In a case of the basic model shown in Section 5.2, attack surfaces 992 are custodian operation function, assets database, and incoming coin 993 management function. 995 Following example shows the incidents caused by unauthorized 996 manipulation among the risks to assets data. 998 o An incident that the malicious transaction generated by assets 999 database which refers manipulated assets data has broadcasted 1000 through a legitimate process. (See: Section 6.2.1.4) 1002 o Unauthorized manipulation to a number of assets stored in asset 1003 data between clients and/or between clients and custodians by 1004 tampering a list of cryptoassets address linked to clients. This 1005 enables losing assets of clients or custodians without 1006 broadcasting the transaction to the blockchain. 1008 Risks of assets data may be considered as risks of system in 1009 financial service and settlement service. However, countermeasures 1010 to the incident that transaction(s) has merged into blockchain as a 1011 result of unauthorized manipulation to the assets data MUST be 1012 considered with an understanding that transaction broadcast to the 1013 network is irreversible. 1015 6.2.3. Risks of suspension on system and operation 1017 Cryptoassets custodians' systems are composed of software, hardware, 1018 networks. Operations are classified as monitoring, opening an 1019 account, an order of transfer, deposit/withdrawal of (crypto/fiat) 1020 assets from the wallet, and any operations by the operator. The 1021 system may be suspended due to various factors. 1023 Cryptoassets custodians' system tends to be a subject to the attack 1024 due to following: the systems are connected to the Internet for 24 1025 hours 365 days, not by the leased line, many of the systems are 1026 deployed on cloud services, prices of cryptoassets are effected from 1027 operating condition of the cryptoassets custodians. Therefore, 1028 countermeasures to the attack MUST be considered. 1030 6.2.3.1. Risks related to network congestion 1032 Cryptoassets custodians may be attacked by DoS and traffic flooding. 1033 In general, targets of attack are a top page of the Website, API 1034 endpoint, etc., but operation and monitoring system deployed on the 1035 Internet may be a target of DoS attack in a case where the attacker 1036 acquired the information of the system beforehand. 1038 6.2.3.2. Risks of system suspension due to infrastructure 1040 System and operation may be suspended in a case data center or cloud 1041 infrastructure where custodian's system is deployed are suspended. 1042 The system may be suspended due to various factors such as blackout 1043 and disruption of communication due to acts of nature, due to 1044 operation failure by cloud or infrastructure, and failure of software 1045 release. 1047 6.2.3.3. Risks of system suspension due to the operator 1049 Even if the system is in operation, there is a possibility that the 1050 service may be suspended if operation monitoring and the activities 1051 of the operator in charge of work are hindered. For example, there 1052 is a possibility that business would be suspended due to various 1053 factors such as periodic inspection of power supply facilities at 1054 operational sites, disruption of transportation by disaster, strikes, 1055 and obstruction of building access by protest activities and rush of 1056 reporters. There are also risks that many personnel cannot operate 1057 due to the same reasons, such as using the same transportation 1058 method, participating in the same event, or traffic accident or food 1059 poisoning. 1061 6.2.3.4. Regulatory risks 1063 In countries where the cryptoassets custodian is defined by law and 1064 should be licensed or registered, operations may be suspended by 1065 order of business improvement, operation suspends, deletion of 1066 license or registration issued by the authority. 1068 6.3. Risks from external factors 1070 Even if a cryptoassets custodian performs its operation 1071 appropriately, the cryptoassets custodian could not continue the 1072 service or might not execute transactions when encountering attack to 1073 the blockchain network and/or the network infrastructure connecting 1074 each node. 1076 6.3.1. Risks related to the Internet, Web PKI, and users environment 1078 6.3.1.1. Attack to Internet routing and DNS 1080 Attackers can lower the reachability to cryptoassets custodians, lure 1081 a user into the fake cryptoassets custodian, or fork deliberately by 1082 preventing the synchronization of the blockchain, through the 1083 intervention in routing or DNS, such as BGP hijacking. These methods 1084 might be used by not only malicious attackers, ISPs acting 1085 governments order. 1087 6.3.1.2. Attack to Web PKI 1089 Most cryptoassets custodians provide their services on the Web and 1090 use TLS and server certificates for authenticity and confidentiality 1091 of their website. When the certification authority issuing their 1092 certificates encounter an attack, it yields to enable to spoofing the 1093 cryptoassets custodians' website. When the certificate is revoked, 1094 the cryptoassets custodian might not be able to provide own service. 1096 6.3.1.3. Attack to messaging systems 1098 Attackers can swindle or block the e-mail and SMS using for 1099 delivering One-Time Password, through the intervention in messaging 1100 systems such as SMS or e-mail. When a users message is swindled, 1101 attackers can log in as the spoofed user or reset the password. 1103 6.3.1.4. Risks related to users environment infection 1105 When a user's environment such as PC and smartphone is infected by 1106 malware, any secrets such as credentials in the environment might be 1107 swindled. 1109 6.3.2. Risks related to cryptocurrency blockchain 1111 6.3.2.1. Split or fork of blockchain 1113 A distributed ledger might be forked by specification changes without 1114 consensus in the developers community. There are two cases around 1115 the fork; one is that the transaction before the fork is executed and 1116 recorded in both ledgers after the fork, another one is that the 1117 transaction before the fork is executed and recorded in only one 1118 ledger. 1120 6.3.2.2. Blockchain Re-organization caused by 51% attack or selfish 1121 mining 1123 When a block which is committed in the past is discarded, the 1124 transaction included in the discarded block might be rolled back. 1125 The transaction included in the discarded block is disabled, and 1126 cryptoassets or fiat money paid in compensation for the transaction 1127 might be swindled. 1129 6.3.2.3. Compromising cryptographic algorithm and hash function 1131 Improvement of performance of computing power and the discovery of 1132 effective attack might cause being compromisation of the 1133 cryptographic algorithm and hash function. 1135 6.3.2.4. Inadequate blockchain specification and implementation 1137 In the cryptoassets Lisk, there were implementations in which the 1138 timestamp value of the transaction allowed implementation of 1139 numerical value input in a range not permitted by the internal 1140 database so that each node could not process the transaction and 1141 block generation stopped[LISK-ISSUE:2088]. This issue was fixed 1142 within several hours after the problem occurred and the node updated 1143 the client software, and the network was sequentially recovered. 1145 However, the transactions could not be processed in the blockchain 1146 for a certain period. 1148 There are cases that token value collapses due to inadequate 1149 implementations of smart contract. In Beautychain Token (BEC) of 1150 ERC20 token issued on Ethereum, there is a vulnerability that causes 1151 overflow in the smart contract, so there is an attack which derives 1152 greatly exceeded tokens over the upper limit, then the worth of BEC 1153 was collapsed. [CVE-2018-10299] 1155 6.3.2.5. Rapid changes in the hashrate 1157 When the hash rate increases or decreases rapidly, it might take a 1158 very long time for generating blocks using the remaining node. 1160 6.3.3. Risks from external reputation 1162 6.3.3.1. Bank account frozen 1164 Banks might freeze an account of cryptoassets custodians operation, 1165 by the guidance of regulatory as a countermeasure for AML/CFT, or by 1166 some accidents/incidents. This freeze results in a suspending a 1167 deposit/withdraw operation of clients fiat assets. 1169 6.3.3.2. Address of cryptocurency 1171 As countermeasures for AML/CFT, other cryptoassets custodian Y might 1172 assess whether the destination address of cryptoassets custodian X 1173 have a high deal risk when a user of Y transfers some assets to the 1174 address of X. If an address of X is blacklisted, the transaction 1175 between X and Y might not be executed smoothly. 1177 Since criminals often transfer the stolen "cryptoassets" to 1178 unmalicious third party's address for disrupting investigation, the 1179 address might be involuntarily categorized as high-risk. 1181 6.3.3.3. Filtering or blocking website 1183 Users might not be able to access cryptoassets custodian when its URL 1184 is filtered out by network operators or is blocked by ISPs. When a 1185 cryptoassets custodian's website is recognized as used for malware 1186 distribution, its URL might not be appeared in search results or not 1187 be able to browse in the browser. 1189 6.3.3.4. Email 1191 Most mail servers provide a filtering service or a classifying 1192 service based on reputation, as countermeasures for spam mail. If 1193 the e-mail from the cryptoassets custodian is recognized as spam 1194 mail, the custodian might not be able to contact the user. 1196 6.3.3.5. Appraisal of a smartphone application 1198 Application delivery platform might limit applications from handling 1199 cryptoassets. When the application provided by a cryptoassets 1200 custodian could not be approved by the platforms, a user cannot 1201 download the application for access to the custodian, and cannot use 1202 the services. 1204 6.3.3.6. ID theft 1206 There is some case where the attacker acts malicious instruction 1207 spoofing as a user, for example: - list based attack, - theft of ID, 1208 password or other credentials, by a malware infection, and - theft of 1209 API access token. 1211 The distinctive purposes of spoofing are: - theft of fiat currency or 1212 cryptoassets by unauthorized withdrawals, - money laundering by 1213 cashing cryptoassets with an account in the name of other people, and 1214 - profit shifting by market manipulation by unauthorized buy and sell 1215 cryptoassets. 1217 7. Considerations of security controls on Cryptoassets Custodians 1219 7.1. General 1221 Below is a basis of security controls about risks written in 1222 Section 6. 1224 To promote understanding and coverage, all security controls in this 1225 chapter are followed by below: [ISO.27001:2013] , [ISO.27002:2013]. 1226 There are some specific considerations for Cryptoassets Custodians to 1227 follow ISOs. Especially, the organization shall consider for strong 1228 controls to manage signature keys for cryptoassets backed by assets. 1230 Other security controls are expected to be referred to similar 1231 operations by the financial sector. Security controls should be 1232 included concrete content from results of risk analysis and 1233 vulnerability diagnosis. Threats of cybersecurity are changing, 1234 reviews of security controls according to situations are important. 1235 Articles below are expected to describe contents by references and 1236 completion of description. 1238 7.2. Basis for consideration about security management 1240 There are some standards of requirement for information security, 1241 [ISO.27001:2013] and [ISO.27002:2013]. Cryptoassets Custodians shall 1242 refer the requirement or guidance of these standards and consider 1243 security controls needed and shall establish, implement, maintain and 1244 continually improve security management. Cryptoassets Custodians has 1245 data of customers asset, self asset, customer information, signature 1246 keys. Those shall be protected from leakage, loss, tampering, and 1247 misuse. Cryptoassets Custodians shall consider about risks of lost 1248 assets by foreign factors such as blockchains or network, suspension 1249 of system, and shall act properly. Cryptoassets Custodians shall 1250 mainly consider about security management described below: 1252 o Interested parties (from "4. Context of organization", 1253 [ISO.27001:2013]) To protect assets of cryptoassets custodian's 1254 customer. Division of responsibility between outsourced and 1255 cryptoassets custodians such as management of signature keys for 1256 cryptoassets. Impact of business such as money laundering shall 1257 be considered from another viewpoint. 1259 o Policy (from "5. Leadership", [ISO.27001:2013]) Cryptoassets 1260 custodians shall establish an information security policy that 1261 includes information security objectives and controls. 1262 Information security policy shall be disclosed so that customers 1263 can browse. 1265 o Continual improvement and risk assessment (from "6. Planning", 1266 "8. Operation", "9. Performance evaluation", and 1267 "10.Improvement", [ISO.27001:2013]) As described in Section 6.3.2, 1268 numbers of cryptoassets have been developed and its speed of 1269 evolving is rapid, Cryptoassets Custodians shall monitor security 1270 risks about cryptoassets in addition to information security 1271 management applied in general. Cryptoassets Custodians shall 1272 review and improve security controls according to the situation. 1274 7.3. Considerations about security controls on Cryptoassets custodians 1276 Cryptoassets Custodians shall determine information security 1277 objectives and controls from the viewpoint listed below: 1279 o Risk treatment options to prevent from loss, steal, leakage, 1280 misuse of secret keys used for cryptoassets, customer data, and 1281 customer asset. 1283 o Compliance with business 1285 o Compliance with legal and contractual requirements 1286 There are some considerations described in Section 7.2 about security 1287 controls based on system risks at Cryptoassets Custodians. There is 1288 a guidance for security controls as [ISO.27002:2013], Cryptoassets 1289 Custodians shall refer it to design and / or identify security 1290 controls. Section 7.3.1 to Section 7.3.13 below are followed to 1291 [ISO.27002:2013] and describe items to be especially noted in the 1292 virtual currency exchange system. 1294 7.3.1. Information security policies 1296 Information security policies shall be defined to follow Section 5 on 1297 [ISO.27002:2013]. Information security objectives on Cryptoassets 1298 Custodians shall include conservation of customer's asset, 1299 requirements of the business, compliance with legal and contractual 1300 requirements, social responsibilities. Information security policies 1301 shall contain policies about access controls ( on Section 7.3.5 ), 1302 cryptographic controls ( on Section 7.3.6 ), operations security ( on 1303 Section 7.3.8 ), and communications security ( on Section 7.3.9 ) . 1305 7.3.2. Organization of information security 1307 Cryptoassets custodians shall follow "6. Organization of information 1308 security" on [ISO.27002:2013], and shall establish a management 1309 framework to implement and operate information security. 1310 Cryptoassets custodians shall consider about threats such as an 1311 illegal acquisition of signature keys or illegal creation of 1312 transaction carefully. Segregation of duties shall be fully examined 1313 to manage signature keys for signing or to permit create 1314 transactions. 1316 7.3.3. Human resource security 1318 Cryptoassets custodians shall follow section "7. Human resource 1319 security" on [ISO.27002:2013]. To examine and evaluate security 1320 controls, cryptoassets custodians shall deploy human resources with 1321 expertise not only in information security applied in general but 1322 also in cryptoassets and blockchain technology. All employees may 1323 handle assets and shall receive appropriate education and training 1324 and regular updates in organizational policies and procedures. 1326 7.3.4. Asset management 1328 Cryptoassets custodians shall follow section "8. Asset management" 1329 on [ISO.27002:2013]. Cryptoassets custodians shall contain any 1330 pieces of information to manage assets, and information and asset of 1331 the customer such as the signature key. Cryptoassets custodians 1332 shall determine controls suitable for risks to follow this section if 1333 cryptoassets custodians operate hardware wallets. To protect assets 1334 of customers, cryptoassets custodians shall separate assets into 1335 customers and custodians to follow compliances with accounting. 1337 7.3.5. Access control 1339 Cryptoassets Custodians shall follow section "9. Access Controls" on 1340 [ISO.27002:2013]. 1342 Users are separated into 2 parties; Permitted operators and 1343 administrators within outsourced, and customers. Some considerations 1344 for operators and administrators are written in Section 7.3.5.1, and 1345 for customer is written in Section 7.3.5.2 1347 7.3.5.1. Access controls for operators and administrators 1349 There are some cases for operators and administrators. 1351 o Operators and administrators for custodians system. They will 1352 command to create keys or to transfer funds by software or 1353 terminal. 1355 o Administrators to maintain hardware, OS, databases, and 1356 middleware. 1358 Management measures of signature keys such as activate, backup, 1359 restore are described on Section 7.3.6. Cryptoassets custodian shall 1360 be carried out to assign authority to operate properly and shall set 1361 access control. Access controls shall be include authorize and 1362 permit to connect custodians system from remote, authorize for 1363 external service if using as functions for cryptoasset custodians, 1364 authorize as a user for OS and databases, permit to enter and leave 1365 facilities systems or terminals installed. There are some factors to 1366 permit access: Only office hours or predetermined hours, Only IP 1367 addresses assigned for specific terminals, Confirm by credentials to 1368 connect from operators or terminals predetermined. Cryptoassets 1369 custodians shall consider for access control policies by roles or 1370 authorities of operators and administrators for each system. Access 1371 control shall be set the minimum to run functions or software 1372 permitted for operators or administrators, not only for applications. 1374 Any damage may be happened by miss or injustice operations on 1375 transferring assets or managing signature keys as described 1376 Section 6.2. To deter these threats, Confirmation of or approval by 1377 multiple operators or multiple administrators shall be needed on 1378 important operations such as transferring assets and operations for 1379 the signature key. Cryptoassets custodians shall not concentrate 1380 duties for one operator or administrator, decentralize of duties for 1381 multiple operators or administrators shall be needed. 1383 7.3.5.2. Access control for customers (user authentication / API) 1385 o Strict personal identification on setup account The account shall 1386 be set up by strict personal identification, and account 1387 information shall be sent to the person itself. For example, 1388 personal identification shall be operated by an identification 1389 document issued by the public organization and shall be sent a 1390 letter to the address without forwarding. Personal identification 1391 shall be carried out in accordance with relevant laws, 1392 regulations, treaty such as FATF. Replacement of pictures on an 1393 identification document or falsification of attribute information 1394 is typical treats for personal identification. In order to 1395 operate personal identification strictly, it shall be carried out 1396 to verify by software or visual check and verify by an electric 1397 method such as signature that is hard to falsification. 1399 o Managing credential and multi-factor authentication For user 1400 authentication, it is expected to prevent from spoofing and 1401 internal injustice by installing risk-based authentication on not 1402 normal access ( such as a characteristic of terminal or route, and 1403 different time slot from usual ) and multi factor authentication 1404 on spoofing by leakage of single credential. It is NOT 1405 recommended to deliver one-time-password by unprotected 1406 transmission line as email because there is a risk of 1407 impersonation or fraud on the transfer route. Confirming 1408 telephone number by SMS was valid for verifying owner and 1409 reachability, but that has been RESTRICTED by NIST, so personal 1410 authentication technology such as possession identification and 1411 transaction authentication technology should be applied. SMS may 1412 be one factor used to recovery account, but not measure to confirm 1413 the existence and authenticate. 1415 o Multi-factor authentication, risk-based authentication It shall be 1416 carried out to register customer and set access controls strictly 1417 to avoid defraud customer funds, changing to fiat and money 1418 laundering by spoofing customers. 1420 o Confirmation of intention according to the risk of operation To be 1421 consistent with the convenience of customers and safety of 1422 service, It shall be considered to make a different level to 1423 authenticate by risks of customer's operation. For example, low- 1424 risk operations such as display balance of account or details of 1425 trade may be allowed by single-factor authentication, but update 1426 transactions such as trading coins or changing address or account 1427 shall be authenticated by an additional factor. In addition, 1428 operations it may cause damages such as output coin or order of 1429 fiat transaction shall be ordered to confirm by additional 1430 authenticate or to confirm intention by an operator. 1432 o Data preservation on deleting an account Cryptoassets custodians 1433 shall implement system be able to rollback after erasing for a 1434 certain period if customer stated spoofed or unauthorized access. 1435 Cryptoassets custodians shall delete the account if requested from 1436 a customer, but they also shall consider about risks that attacker 1437 spoofed to customer requests to delete the account. 1439 o Signature key preservation on discontinue addresses Signature keys 1440 linked to an account shall not be deleted even if the address of 1441 cryptoassets has no value. On a prediction for the general 1442 cryptoassets customer is allowed to send assets for any addresses 1443 and not technically prevented to send, signature keys for wallet 1444 stopped to use shall be taken back up for reuse because the 1445 possibility of receive coins to the address exists. 1447 o Consideration for supplying APIs To set access control for 1448 operations by a customer, it shall be considered about not only 1449 operations of dialogue operations on the web but also APIs 1450 connecting from the application by smartphone and from external 1451 systems. For providing APIs, It shall be implemented to consider 1452 cases that are difficult to get explicit approval from customer. 1453 It shall comply with best practices shared in the industry based 1454 on the attack risk peculiar to API. For reference, it may be 1455 followed to Financial API by OpenID Foundation. 1457 7.3.6. Security controls on signature keys 1459 It SHALL conform to Section 10 "Cipher" of [ISO.27002:2013]. 1461 Particularly, some security controls for the signature key, an issue 1462 specific to cryptoassets custodians, are closely related to the 1463 controls in other sub-sections in this section (e.g., Section 7.3.5). 1465 Amount of cryptoassets in Hot Wallet MUST be limited to a minimum 1466 amount and isolate their remain assets to another secure place, e.g., 1467 Cold wallet. The minimum amount means the amount which can be 1468 temporarily paid within the time it takes to withdraw the assets from 1469 the secure place. Custodian can be refunded to the customers from 1470 the remain assets even if the assets in Hot Wallet leaks. 1472 Custodians MUST choose an appropriate cryptographic technology that 1473 has been evaluated its security by the third party in accordance with 1474 the purpose of use, as with general information systems. Also, they 1475 MUST decide the life cycle of a signature key and MUST implement and 1476 operate appropriate controls. 1478 7.3.6.1. Basics of Signature Key Management 1480 In general, followings are required in the management of private keys 1481 including signature keys. 1483 o They should be isolated from other informational assets. Rigorous 1484 access control is mandatory. 1486 o Limit the number of access to signature keys as minimum as 1487 possible. 1489 o Be prepared for unintentional lost of signature keys. 1491 Followings are three basic security control to realize above. 1492 Additional security controls specific to crypto assets custodians are 1493 described in and after sub-sections Section 7.3.6.2. 1495 1. State management of signature keys As described in Figure 2, a 1496 signature key has one of the multiple states generally, and it 1497 may be an active or inactive state in its operation. The 1498 signature key MUST be in an active state when it is used for 1499 signing (or decryption). It is recommended to enforce to input 1500 some secret information to activate from the inactive signature 1501 key. This makes keeping the inactive signature key away from 1502 abuse if the adversary does not have the secret information. 1503 This method ensures also the security of the signature key 1504 against leakage and lost. It is also recommended to minimize the 1505 term of activation to limit the risk of abuse as minimum as 1506 possible. Unnecessary activation of the signature key increases 1507 the risk of abuse, leakage, and theft, though keeping the 1508 activation state is efficient from a business viewpoint. On the 1509 other hand, frequent activation/inactivation may give impact to 1510 business efficiency. It is important to consider the trade-off 1511 between the risk and business efficiency and provide clear key 1512 management policy to customers. 1514 2. Administrator role separation and two-person rule It is a 1515 fundamental form of operation of a critical business process 1516 which uses the signature key to perform cryptographic operations 1517 by multiple parties to prevent internal frauds and errors. For 1518 example, by setting separated privilege on digitally signing and 1519 approval to go into the area of signing operation, it becomes 1520 difficult for the single adversary to give a malicious digital 1521 signature without known by the third party. Additionally, the 1522 enforcement of the two-person rule is effective security control 1523 to internal frauds and misoperations. 1525 3. Backup of a signature key Lost of the signature key makes signing 1526 operations (by using the key) impossible any more. Thus backup 1527 of the signature key is an important security control. Since 1528 lost of the signature key makes signing operations impossible any 1529 more, backup of the signature key is an important security 1530 control. On the other hand, risks of leakage and theft of backup 1531 keys MUST be considered. It is needed to inactivate the backup 1532 keys. Additionally, monitoring the blockchain whether to perform 1533 the outgoing-coin from that address to detect the inappropriate 1534 backup and the illegal-use of little-used address. 1536 7.3.6.2. Offline Key Management 1538 There is a type of offline key management (as known as "cold wallet") 1539 which isolates signature keys from the system network to prevent 1540 leakage and theft caused by the intrusion. 1542 Figure 4: Example of offline signature key management 1544 In this case, it REQUIREs some kind of offline operations to make the 1545 system use the signature key. 1547 Examples are a) it requires to move a signature key from the vault 1548 and to connect to the online system, b) input/output between online 1549 system and offline (key management) system does perform through a 1550 kind of storage, such a USB Flash Drive. 1552 If there is not an explicit approval process for the signature key 1553 used in the offline operation, anyone cannot stop the malicious 1554 transaction. That is, for achieving this solution can prevent abuse, 1555 loss, and theft of signature keys, an explicit approval process is 1556 needed for this solution. 1558 7.3.6.3. Privilege separation of signature keys (Authorization process) 1560 Both privilege separation and two-person control of signature key 1561 management are effective as shown in Section 7.3.6. In addition, 1562 there is multi-signature as a typical scheme for 1563 blockchain[BIP-0010][BIP-0011]. Multi-signature REQUIREs an 1564 authorization process with multi-stakeholders, and it is achieved by 1565 signing with the signature keys managed by each stakeholder. Each 1566 stakeholder MUST verify other signatures technically if exists, and 1567 MUST validate the practical consistency of the transaction. 1569 Authorization process with multiple stakeholders can expect for a 1570 general countermeasure for malicious generation of a transaction. 1572 Note, however, that security controls for the leakage and/or loss of 1573 the signature key are still needed. 1575 Since a multi-signature scheme is provided by software, its logic and 1576 implementations are varied with some blockchain. e.g., multi- 1577 signature in Ethereum is implemented on smart contract, so that there 1578 are various implementations with each wallet software. Also, some 1579 blockchains might not support multi-signature, therefore some 1580 cryptoassets could not adopt multi-signature. 1582 Also, there is another similar scheme "Secret Sharing Scheme" which 1583 is applicable to privilege separation. This is a management 1584 technology in a distributed environment which has divided secret 1585 respectively, and one of the countermeasures for leakage and/or lost 1586 of signature key. However, this scheme is rather a technology for 1587 single stakeholder with multi-location operation than multi- 1588 stakeholders, because it REQUIREs a validation scheme separately for 1589 the transaction to each stakeholder and management of the divided 1590 secret is rather depend to implementation than the signature key. 1592 7.3.6.4. Backup for Signature Key 1594 Backup is the most fundamental and effective measure against lost of 1595 signature key. On the other hand, there are risks of leakage and 1596 loss of the backup device. 1598 These risks depend on the kind backup device, thus security controls 1599 on such devices MUST be considered independently. Followings 1600 describe typical backup devices and leakage/theft risks associated 1601 with them. 1603 o Cloning to the tamper-resistant cryptographic key management 1604 device If a signature key is managed by a tamper-resistant key 1605 management device (device X) and X has cloning function, cloning 1606 the key to another device Y is the most secure way to back up the 1607 key, where the cloning function is the technique to copy the key 1608 with keeping confidentiality to other devices than X and Y [_11]. 1609 The implementation of the function is recommended to be evaluated/ 1610 certified by certification programs like CMVP or FIPS 140. Note 1611 that, the cryptographic algorithms supported by such tamper- 1612 resistant key management devices are limited and all crypto assets 1613 systems can utilize it, but it is one of the most secure ways of 1614 backup. 1616 o Backup to storage for digital data Here, it is assumed to backup 1617 keys to storage like USB memory and DVD. There are two types of 1618 operations; one is backup data is stored in movable devices in an 1619 offline manner, the other is backup data is stored in an online 1620 accessible manner. If the device is movable, the possibility of 1621 steal and lost increases, thus the device MUST be kept in a 1622 cabinet or a vault with the key, and the access control to such 1623 cabinet/vault MUST be restricted. Of the backup storage is 1624 online, risks of leakage and theft MUST be assumed as same as the 1625 key management function implementation inside the cryptoassets 1626 custodian. In general, the same security control is recommended 1627 to such backup storage. If there is some additional operation, 1628 for example, the backup device is inactivated except for the time 1629 of restore, the security control may be modified with considering 1630 the operating environment. When it is not avoided the raw key 1631 data is outside of the key management function implementation, the 1632 custodian MUST deal with the problem of remained magnetics. 1634 o Backup to paper There is a way to backup keys in an offline 1635 manner, to print them to papers as a QR code or other machine 1636 readable ways. It is movable than storage for digital data and 1637 easy to identify. There remains some risk of leakage and theft by 1638 taking a photo by smartphone and so on. 1640 o Redundant with Sharing secret scheme Dividing of signature key to 1641 multiple parts, then managing them by multiple isolated systems is 1642 an effective measure to protect the keys against leakage and 1643 theft. This document does not recommend a specific technique but 1644 RECOMMENDs to implement this control based on a certain level of 1645 security evaluation like a secret sharing scheme. In that case, 1646 secure coding and mounting penetration test are REQUIRED to 1647 eliminate the implementation vulnerabilities. This method is also 1648 effective for backup devices. 1650 7.3.6.5. Procurement of hardware wallet 1652 When introducing a wallet, it is RECOMMEND to use a product whose 1653 technical security is guaranteed like HSM which is originally used 1654 for existing PKI service etc. However, some products may not be 1655 applicable currently because they often do not support a kind of 1656 cryptographic algorithm used by crypto assets. Therefore, if 1657 introducing a wallet, it is RECOMMEND to operate in mind the 1658 following points with accepting the technical insufficiency: 1660 o MUST not use hardware obtained through the untrusted procurement 1661 route. 1663 o MUST apply the latest firmware and patches provided by the 1664 manufacturer. 1666 o Initialization and key generation MUST do themselves, SHOULD NOT 1667 use default settings without careful considerations. 1669 o MUST consider trustworthy of software instructing a sign to 1670 hardware wallet, especially whether it supports multi-signature or 1671 signing at the offline environment. 1673 Additionally, when custodian uses only hardware wallets in the 1674 marketplace, they MUST manage it according to section Section 7.3.4. 1676 On the other hand, hardware wallets MUST be subject to the third- 1677 party or independent certification scheme for security. If 1678 introducing a software wallet from outside, it MUST consider the 1679 potentiality of containing malicious code, vulnerability, and bugs. 1681 7.3.7. Physical and environmental security 1683 Cryptoassets custodians system MUST follow section "11. Physical and 1684 environmental security" on [ISO.27002:2013]. 1686 Cryptoassets custodians system MUST consider strict physical security 1687 protections for the following elements. 1689 o Media containing a signature key. (Signature key management shown 1690 in Figure 1) 1692 o Media containing a signature key for cold wallet environment. 1693 (Signature key management for offline management shown in 1694 Figure 4.) 1696 o Media containing a backup data of signature key 1698 If the signature key mentioned above is stored in the deactivated 1699 state, and also key encryption key to activate the signature key is 1700 controlled separately, the media containing the key encryption key 1701 MUST be strictly managed. 1703 The security control to these signature key MUST be separated from 1704 the security control of the crypto assets custodian system. In 1705 addition to this control, access to facilities and environments which 1706 store media containing a signature key or information required to 1707 operate the signature key MUST be restricted. (See: Section 7.3.6) 1709 Furthermore, countermeasures to loss or theft for the operational 1710 device MUST be taken place if the administration or operation is 1711 executed from a remote place such as out of a facility. 1713 7.3.8. Operations security 1715 Crypto Assets Custodian systems MUST follow section "12. Operations 1716 security" on [ISO.27002:2013]. In addition to the standard, 1717 cryptoassets custodian systems SHALL comply with the security 1718 controls mentioned following sections. 1720 7.3.8.1. Protections from malicious software (Related to ISO.27002:2013 1721 12.2) 1723 Detection and recovery measures of malware MUST be appropriately 1724 taken place according to configurations, the environment of 1725 cryptoassets custodian systems and confidentiality and importance of 1726 information handled in the systems. 1728 In general, one of the prevention measures for malware is applying 1729 security patches to operating systems, middlewares of cryptoassets 1730 custodian systems. However, those patches MUST be applied upon 1731 sufficient confirmation based on the importance and urgency of a 1732 patch. Moreover, testing and deployment procedure of security patch 1733 MUST be considered beforehand just in case attacks against the 1734 vulnerability have already confirmed. 1736 7.3.8.2. Backup (Related to ISO.27002:2013 12.3) 1738 Upon making a backup of systems, strict security controls to 1739 important data which suffered severe damage by leakages such as the 1740 signature key or master seed MUST be applied same as data subject to 1741 backup (e.g., an appropriate selection for storage, and enforcement 1742 of strict access controls.) Security controls such as distributed 1743 storage mentioned in Section 7.3.6), proper privilege separation on 1744 backup and restore between operators and people making an 1745 authorization, and operation with multiple parties are also 1746 important. 1748 7.3.8.3. Logging and monitoring (Related to ISO.27002:2013 12.4) 1750 Crypto asset custodians systems MUST obtain/monitor/record logs 1751 properly (not limited to but include following logs). 1753 o Logs on the environment where the cryptoassets custodian system 1754 Collecting and monitoring of event log outputted from the system 1755 components such as middleware, operating systems, and computers 1756 detects an abnormal state of environment where the system runs. 1757 Collected logs are used to investigate a cause in the case of the 1758 incident. 1760 o Logs on the processing of components of crypto assets custodians 1761 system Collecting and monitoring of the processing logs from each 1762 component detects an abnormal state of crypto assets custodians 1763 system. Collecting proper logs are used as a proof of proper 1764 processing inside the crypto assets custodians system, and also 1765 used to investigate a cause in a case of the incident. 1767 o Access log of signature key Information such as date, a source 1768 terminal, an operator(not a role but information to identify an 1769 operator) MUST be obtained and recorded in a case of operations 1770 such as activation and deactivation of the signature key, access 1771 to the activated signature key and backup/restore. Those records 1772 MUST be validated against the records such as operational 1773 procedures, operating hours, on a periodical inspection such as 1774 weekly inspection. Moreover, in a case where the signature key is 1775 managed online, operational log such as the creation of a 1776 transaction signature by operator MUST be recorded and validated 1777 as well. 1779 o Operational Log of a wallet managed by custodians Logs on 1780 remittance MUST be monitored real-time against the attempt of 1781 outgoing coin transfer in a case where the signature key and 1782 backup are unexpectedly leaked. In a case where an unexpected 1783 remittance has occurred in one of the wallets, monitoring logs 1784 help timely detecting the incidents, suspending all signing 1785 operations, rechecking on other existing wallets, and migrating to 1786 other wallets using a different signature key. 1788 o Access log of administration remote terminal If a remote access to 1789 cryptoassets custodian system is permitted, audit information such 1790 as date, source IP address, terminal information(e.g. terminal ID, 1791 latest result of security evaluation if it's possible) and 1792 destination IP address (or hostname) MUST be obtained and recorded 1793 for auditing which checks the accesses are from/in authorized 1794 range. 1796 o Traffic log between the inside and the outside (e.g., the 1797 Internet) As mentioned in Section 7.3.9.1, Inbound traffic to 1798 cryotoassets custodian systems such as traffic from the Internet 1799 MUST be restricted to a permitted external network or permitted 1800 protocol. Inbound traffic from disallowed network and traffic 1801 using disallowed protocol are denied at the firewall and other 1802 middleboxes. Logs from that equipment are effective to protect 1803 customers from malicious access in terms of not only cryptoassets 1804 custodian system but also the information security. Usually, 1805 outbound traffic from protected assets such as cryptoassets 1806 custodian systems to the Internet and other systems is not a 1807 subject to logging. However, those logs are useful in cases such 1808 as investigations on incidents (e.g., malicious usage of the 1809 signature key, theft of signature key) and detection of the 1810 incident, so entire traffic or network flow are RECOMMENDED to be 1811 acquired according to protocols/destinations. 1813 o Customers access log Customers access log MUST be obtained since 1814 those logs are used to detect malicious login or request. Also, 1815 those logs are used as evidence in a case of incidents. In a case 1816 of malicious login, custodians MUST notify its customer. 1818 * Provide information about the malicious activity to customers 1819 Providing a feature to allow a customer to confirm login 1820 history, source IP address, region, and terminal information, 1821 and login notification by a push-notification or an e-mail are 1822 effective to detect malicious access after the incident. 1823 Feature protecting an account and alerting to a user in cases 1824 when detecting login from unknown source address or terminal, 1825 or detecting consecutive login to multiple accounts from the 1826 same source IP address, are effective to protect a user from 1827 malicious access. 1829 o Images/videos recorded by a surveillance camera and entry/exit 1830 records Storing images/videos recorded by the surveillance camera 1831 and entry/exit records for proper period enables validating if 1832 physical safety control measures work properly after the incident. 1834 Detecting a malicious process execution (e.g., malware), malicious 1835 access, an abnormal state of cryptoassets custodians system by 1836 monitoring logs mentioned above comprehensively is important. 1837 Moreover, storing this evidence is important to prevent internal 1838 fraud and exonerate person involved from the charge. Security 1839 Operation Center (SOC) may help to monitor the system. Outsourcing 1840 to trusted operators about detection and notification of threats in 1841 the operation of SOC may be helpful. 1843 7.3.9. Communications security 1845 Cryptoassets custodians system MUST follow section "13. 1846 Communications security" on [ISO.27002:2013]. 1848 Since assets are managed in a state accessible from the Internet on 1849 cryptoassets custodians system, preventive measures, detection 1850 measures, countermeasures and recovery measures as measures to 1851 prevent information leakage, MUST be considered according to the 1852 risk. 1854 7.3.9.1. Network security management (Related to ISO.27002:2013 clause 1855 13.1.1) 1857 As same as security control measures to general systems, measures 1858 such as a definition of a boundary to the external network, 1859 restriction of connection to a network system(e.g., firewall), stop 1860 unnecessary services or close unnecessary ports, obtaining and 1861 monitoring logs and malicious access detection MUST be considered and 1862 performed. 1864 For logs, logs of internal systems MUST be monitored to detect 1865 internal malicious access, as well as monitoring of boundary to the 1866 external network. (See: Section 7.3.8.3) 1868 Secure communication with proper mutual authentication such as 1869 TLS(Transport Layer Security) MUST be used to protect from attacks to 1870 communication between modules such as eavesdropping and manipulation 1871 in a case where modules of cryptoassets custodians systems are 1872 remotely located. 1874 7.3.9.2. Network segmentation (Related to ISO.27002:2013 13.1.3) 1876 It is important to limit a connection between cryptoassets custodians 1877 systems and other systems/the Internet as minimum as possible to 1878 reduce the risk of exposing against attacks through a network. 1879 Measures as follow such as network segmentation and limitation to 1880 connection MUST be considered. 1882 o Network isolation between custodians systems and other information 1883 systems 1885 * Objectives: Preventing a connection to custodians systems 1886 through information systems used in daily operations, which has 1887 been compromised due to malware infections caused by external 1888 attacks such as targeted attack. 1890 * Countermeasures: Isolate a network between information systems 1891 used in daily operations and custodians system by segmentation 1892 of network or limiting access. 1894 o Network isolation at the boundary to the Internet 1896 * Objective: Preventing access to critical information such as a 1897 signature key from attack through the Internet by minimizing 1898 and isolating modules which connect to the Internet. 1900 * Countermeasures: Features which connects external services on 1901 the Internet to achieve the functionality of custodians system, 1902 transmit transactions or obtain blockchain data MUST be 1903 packaged as a module as minimum as possible or be isolated from 1904 other systems such as locating on DMZ. Moreover, if modules 1905 are connecting to external services, access controls to those 1906 services MUST be adequately performed. 1908 o Limitation on a terminal used in custodians system administration 1910 * Objective: Preventing a malicious operation due to a hijacking 1911 of terminal used in custodians system administration. 1913 * Countermeasures: Limiting a terminal which can connect to 1914 custodians system, such as a terminal to manage a custodians 1915 system administration function and a terminal running an 1916 administrative tool to order operation to custodians system. 1918 7.3.9.3. System acquisition, development and maintenance 1920 Cryptoassets custodians system MUST follow section "14. System 1921 acquisition, development, and maintenance" on [ISO.27002:2013]. 1923 Cryptoassets handled by cryptoassets custodians ranges from high 1924 liquidity cryptoassets dealt with by multiple custodians to emerging 1925 cryptoassets. It is important to reduce a risk regarding system 1926 acquisition, development and maintenance in addition to 1927 [ISO.27002:2013] as characteristics of blockchain network used by 1928 those cryptoassets varies. For example, the following 1929 countermeasures are effective. 1931 o Software development method Secure software development method 1932 such as secure coding and code review MUST be used in the software 1933 development of the custodian system. Code review not only with 1934 the development team but also with an operational team is 1935 effective to detect a vulnerability from the viewpoint of 1936 operation. 1938 o Penetration test Conducting a penetration test helps to detect a 1939 known vulnerability at systems and results in obviating the 1940 attacking risk by the attacker in advance. 1942 o Integration test with blockchain network Test MUST be performed 1943 not only with the test network of blockchain but also with the 1944 production network of the blockchain. Risk assessment MUST be 1945 taken with an understanding of the limitation of test on the 1946 production network such as high-load test. 1948 o Privilege separation on the operation Privilege separation such as 1949 limiting code reviewed software deployment to the production 1950 environment to the system operating team is effective to prevent 1951 tampering attacks from internal. 1953 o Prohibiting using default (factory-configured) values Any factory- 1954 configured authentication information such as password MUST NOT be 1955 used regardless of hardware/software, development environment or 1956 production environment. 1958 7.3.10. Supplier relationships 1960 Cryptoassets custodians system MUST follow section "15. Supplier 1961 relationships" on [ISO.27002:2013]. 1963 Outsourcing wallet-related services may be a reasonable choice in a 1964 case technical security of those services has been secured. 1966 Administrative measures according to [ISO.27002:2013] MUST be taken 1967 in terms of outsourcing contractors or security controls of cloud 1968 service providers in cases where signature key in multi-signature is 1969 delegated to contractors or custodians system is implemented on cloud 1970 services. 1972 7.3.11. Information security incident management 1974 Cryptoassets custodians system MUST follow section "16. Information 1975 security incident management" on [ISO.27002:2013]. 1977 Since cyber attacks got complex, cyber security incidents 1978 unprecedented in the past could occur, especially in cryptoassets 1979 custodians. In addition to security control measures as a 1980 preparation to expected threat in advance, Emergency response 1981 framework MUST be prepared in a case of incidents caused by an 1982 unknown threat. For example, the establishment of internal 1983 CSIRT(Computer Security Incident Response Team) and building a 1984 relationship with external organizations. 1986 7.3.12. Information security aspect of business continuity management 1988 Cryptoassets custodians system MUST follow section "17. Information 1989 security aspect of business continuity management" on 1990 [ISO.27002:2013]. 1992 Requirements, Processes, Procedures and control measures to secure 1993 information security for the cryptoassets custodian in a case of the 1994 severe situation(such as disaster or crisis) MUST be established, 1995 documented, performed and maintained. In this case, administrative 1996 measures in a case where countermeasures have performed or in a 1997 period of a severe situation MUST be verified periodically. 1999 Moreover, operators MUST consider to shut down the system 2000 situationally. 2002 o In a case where facilities (including facilities used as an 2003 office) are unavailable 2005 * Power outage 2007 * Damages of building 2009 * An act of nature (e.g., earthquakes, fires (including sprayed 2010 water for neighborhoods fire), water outage, flood) 2012 * Other reasons (e.g., facilities are unavailable, or access to 2013 the facilities are prohibited by law/regulations/authorities.) 2015 o In a case where it's difficult to continue the system 2017 * In a case of becoming difficult to continue running an 2018 emergency electric generator. 2020 * Long suspension of public transportation services, a pandemic 2021 of disease, lack of human resources by an act of nature. 2023 * Failure of a communication network 2025 * Failure of equipment 2027 * Failure of the system (regardless of reasons such as failure of 2028 a program or cyber attacks) 2030 * Loss of paper wallet or hardware wallet. 2032 * Suspension of outsourcing contractor's business 2034 * Leakage or loss of signature key 2036 o In the case of becoming difficult to continue business 2038 * Business-suspension order by law/regulations. 2040 7.3.12.1. Maintaining availability of the system 2042 Cryptoassets custodians system MUST be designed and implemented to 2043 have enough scalability and redundancy for users with consideration 2044 of a number of users, peak date/time of transactions, system response 2045 time, maintenance period/frequency and securing a human resource for 2046 operation. Moreover, consideration for increasing the capacity of 2047 the system MUST be performed in advance with enough threshold (e.g., 2048 number of transactions or memory usage during a peak period). 2050 7.3.13. Compliance 2052 Cryptoassets custodians MUST respect the guidelines or laws of the 2053 region or country. (See Appendix 3 for a country of Japan) 2055 7.4. Other cryptoassets custodians system specific issues 2057 7.4.1. Advance notice to user for maintenance 2059 Cryptoassets custodians are RECOMMENDED to publish a notice of 2060 maintenance schedule in advance in a case where periodical schedule 2061 especially service suspension is planned in a night. Also, 2062 Cryptoassets custodians are RECOMMENDED to provide information 2063 regarding the failure of the system at other FQDN/IP addresses to 2064 avert high volume traffic to the web server in addition to usual way 2065 of notice such as by e-mail or on the website, in a case of emergency 2066 maintenance. 2068 Moreover, cryptoassets custodians are RECOMMENDED to put forth an 2069 effort to minimize an affected area from a viewpoint of user 2070 protection in a case of service suspension caused by immediate issues 2071 such as attacks from external. 2073 8. Future work 2075 Discussion of distributed exchange (DEX) is currently out-of-the- 2076 scope of this document. 2078 9. Security Considerations 2080 Security Considerations are included in the main section of this 2081 document. 2083 10. IANA Considerations 2085 None. 2087 11. References 2089 11.1. Normative References 2091 [ISO.27001:2013] 2092 International Organization for Standardization, 2093 "Information technology -- Security techniques -- 2094 Information security management systems -- Requirements", 2095 ISO/IEC 27001:2013, October 2013, 2096 . 2098 [ISO.27002:2013] 2099 International Organization for Standardization, 2100 "Information technology -- Security techniques -- Code of 2101 practice for information security controls", ISO/ 2102 IEC 27002:2013, October 2013, 2103 . 2105 [RFC2119] Bradner, S., "Key words for use in RFCs to Indicate 2106 Requirement Levels", BCP 14, RFC 2119, 2107 DOI 10.17487/RFC2119, March 1997, 2108 . 2110 [RFC8174] Leiba, B., "Ambiguity of Uppercase vs Lowercase in RFC 2111 2119 Key Words", BCP 14, RFC 8174, DOI 10.17487/RFC8174, 2112 May 2017, . 2114 11.2. Informative References 2116 [BIP-0010] 2117 Reiner, A., "Multi-Sig Transaction Distribution", BIP 10, 2118 October 2011, 2119 . 2122 [BIP-0011] 2123 Andresen, G., "M-of-N Standard Transactions", BIP 10, 2124 October 2011, 2125 . 2128 [CVE-2018-10299] 2129 MITRE Corporation, "CVE-2018-10299", CVE 2018-10299, April 2130 2018, . 2133 [I-D.nakajima-crypto-asset-terminology] 2134 Nakajima, H., Kusunoki, M., Hida, K., Suga, Y., and T. 2135 Hayashi, "Terminology for Cryptoassets", draft-nakajima- 2136 crypto-asset-terminology-02 (work in progress), July 2019. 2138 [LISK-ISSUE:2088] 2139 MaciejBaj, ., "Check INT_32 range for transaction 2140 timestamps", June 2018, 2141 . 2143 11.3. URIs 2145 [1] https://vcgtf.github.io 2147 Acknowledgements 2149 Thanks to Masanori Kusunoki, Yasushi Matsumoto, Natsuhiko Sakimura, 2150 Yuji Suga, Tatsuya Hayashi, Keiichi Hida, Kenichi Sugawara, Naochika 2151 Hanamura, and other members of the Security Working Group of 2152 CryptoAssets Governance Task Force [1]. 2154 Editorial Comments 2156 [_11] For example, cloning via PC does not meet this requirement when 2157 the signature key is read into memory on the PC in the cloning. 2159 Authors' Addresses 2161 Masashi Sato 2162 SECOM Co., Ltd. Intelligent System Laboratory 2163 Shimorenjaku 8-10-16 2164 SECOM SC Center 2165 Tokyo, Mitaka 181-8528 2166 JAPAN 2168 Email: satomasa756@gmail.com 2170 Masaki Shimaoka 2171 SECOM Co., Ltd. Intelligent System Laboratory 2172 Shimorenjaku 8-10-16 2173 SECOM SC Center 2174 Tokyo, Mitaka 181-8528 2175 JAPAN 2177 Email: m-shimaoka@secom.co.jp 2178 Hirotaka Nakajima (editor) 2179 Mercari, Inc. R4D 2180 Roppongi 6-10-1 2181 Roppongi Hills Mori Tower 43F 2182 Tokyo, Minato 106-6143 2183 JAPAN 2185 Email: nunnun@mercari.com