Cryptographic Keys and Hardware Security Modules -An Introduction

Security compliance is non-negotiable. No matter what.

Irrespective of whether you are into digital banking, card issuance, or lending, you must remember that
your customer data, credentials, and documents are vulnerable to security hazards. Without strong risk
management measures, you may risk exposing yourself and your customers to data breaches, cyber-
attacks, and exorbitant fines from regulatory authorities. This is where cryptography, the science of
protecting sensitive data saves the day, by delivering the highest levels of data protection.

Cryptographic Keys

Cryptography uses digital keys to encrypt and decrypt data with required levels of complexity for secure
access and compliant operations.

So, what is a cryptographic key?

A cryptographic key refers to a string of characters in an encryption algorithm that helps randomly
create the desired data. This key helps convert a plain text to ciphertext and vice-versa whenever data
encryption and decryption happens. Efforts must ensure that only the authorized user has access to the
key. The encrypted data must be stored securely for decryption without any discrepancy.

Lifecycle of a Cryptographic Key

The following process comprises the cryptographic key lifecycle.

Provisioning -The provisioning process generates keys using a key management system, an hardware
security module (HSM), or a Trusted Third Party (TTP) through random number generators. The keys
should be strong enough to provide the necessary protection to secure the data.

Backup and storage- This is a critical step where a secure backup copy of the key is made. It should be
available for future retrieval if the key undergoes any failures. Such backup keys are often stored in
external media or other backup solutions. All private keys must be encrypted before being stored.

Deployment- The new key is installed electronically or manually into a secure cryptographic devices such
as Hardware Security Module.

Management, Monitoring, and Rotation- Here, the keys are often controlled and monitored with respect
to the industry standards and policies. The encryption key management system handles key rotation and
deploys new keys as and when existing keys expire.

Archiving- The keys that are no longer in operation are stored here for an extended period. They might
be required again in the future for associated data retrieval. The key, when archived, is encrypted for
additional security.

Disposal- The keys are permanently destroyed here, when they are no longer needed. Before
destruction, the key is analyzed and sometimes recovery is processes if necessary. A key can be removed
from its operation using key destruction, key deletion, or key termination.

Generating, securing, and managing cryptographic keys can be multifaceted and complex, requiring
support from information security and development teams.

So, how can you create, monitor, store, and optimally use cryptographic keys ?
Simple. Install HSM.

So, what is Hardware Security Module (HSM)?

Hardware Security Module (HSM) is a device that provides a wired security solution for the wireless
world. It is a dedicated cryptographic processor that offers a secure, tamper-resistant environment
specifically designed to protect identities, devices, and cryptographic key data throughout its lifecycle.

HSM protects any data in use, transit, and rest, for encryption, decryption, authentication, and key
management. In toto, it serves as a ‘trust anchor’ to ensure compliance, simplify audits, generate, and
store keys.

Types of HSMs

HSMs can be broadly classified (as listed below) based on the levels of functionality and compliance with
different security standards.

· General Purpose (GP) HSM

· Transaction HSM

General Purpose (GP) HSM

Wherever there is sensitive data, and the need for encryption prevails, GP HSM is indispensable. It
generates powerful cryptographic commands that can safely encrypt and decrypt information for any
application.

Sample use cases for general purpose HSM are:

· Symmetric key management for database encryption

· Asymmetric keys management for digital signature creation

· Certificates to support Public Key Infrastructure (PKI)

· Crypto wallets

GP HSM supports compliance with the following standards.

· PCI DSS (Payment Card Industry Data Security Standard)

· PCI 3DS (Payment Card Industry 3-Domain Secure)

· GDPR (General Data Protection Regulation)

· FISMA (Federal Information Security Management Act)

· FedRAMP (Federal Risk and Authorization Management Program)

· ICAM (Identity, Credential, and Access Management)

· eIDAS (Electronic Identification and Trust Services)

Transaction HSM

Also known as payments HSM, this security module has advanced security features compared to the
general-purpose counterpart. Transaction HSM enforces dual control using payment-specific
cryptographic commands to ensure sensitive information never leaves the HSM. The PCI SSC compliance
mandates the use of payments HSM for the use cases below.
· When payment transaction processing happens, this supports card, user and cryptogram validation

· Helps in processing EMV transactions

· Generates key and injects it

· Helps facilitate highest security when keys are shared with third parties

· Used for generating, managing, and validating PIN

· Enables electronic funds interchange, Electronic funds transfer at point of sale (EFTPOS), and ATM
transactions

· For payment cards and mobile applications, it helps in generation of payment credentials

· Enables point-to-point encryption (P2PE), key management and secure data decryption

· With payment HSM, cash-card reloading is made hassle-free

· Facilitates PIN block translation when network switch of POS and ATM transaction takes place

Transaction HSM supports compliance with the following standards:

· PIN (Personal Identification Number) Security

· P2PE (Point-to-Point Encryption)

· 3DS (ACS- Access Control Server & DS- Directory Server)

· Card Production

· TSP (Token Service Provider)

· SPoC (Software-Based PIN Entry on COTS)

· CPoC (Contactless Payments on COTS)

Are HSMs trustworthy?

Absolutely!

HSMs have high accuracy and are implanted in a secure and sealed environment. This acts as the trust
factor for every organization to implement. As HSMs work on a dedicated firewall, they never get
exposed to the public internet and thus ensure maximum security. The hardware is designed to give a
high input with minimal resource usage. This is how cryptographic keys and data are protected
optimally.

High on protection

HSMs are commonly used to protect identities, transactions, and applications. They protect the
cryptographic keys by creating a trustable environment in which processes such as encryption,
decryption, and authentication are equipped and secured. They follow industry regulations and
standards such as PCI DSS, FIPS 140–2, European Union’s General Data Protection Regulation, Domain
Name System Security Extensions, and Common Criteria.

How HSM enables maximum security ?

HSMs offer the ultimate protection for all the critical functions involved in payment applications and
databases. Hardware Security Modules come with many features that cannot be overlooked, as they
help organizations maintain a secure transaction infrastructure.

· HSMs are equipped with a secure design that meets all the security standards and adheres to the
Federal Information Processing Standardization (FIPS) 140–2.

· The operating system in HSM is always security focused.

· The higher levels of trust and authentication ensure the maximum security of the sensitive data and
cryptographic keys.

· Automated lifecycle tasks and protective mechanisms are quick and efficient.

· The key is maintained only in the HSM, exempting the possibility of malicious attacks that might occur
virtually.

· HSMs enable application integration with the help of APIs.

Versatility of HSMs

Businesses should use HSMs to safeguard the sensitive information pried by countless threats they
might encounter. In day-to-day applications, HSMs secure data generated across banks, websites,
cryptocurrencies, smart meters, mobile payments, medical devices, PINs, identity cards, and digital
documents.

And the buck doesn’t stop here. HSM protects digital signing, ensures compliance, and helps in key
generation and management. Wherever financial transactions happen, HSMs provide that additional
layer of security.
Today physical HSMs are transitioning to the cloud. Cloud HSM or HSM as a Service (HSMaaS) hosts
encryption keys and cryptographic operations with FIPS 140–2 Level 3 certified modules.

Want to know more about HSMs?

Contact us at business@m2pfintech.com.

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Hardware Security Modules (HSMs): Strengthening Data Protection with Robust Hardware-based
Security

An In-Depth Exploration of HSMs, Their Features, Applications, and Benefits | 2023 | Karthikeyan
Nagaraj

Karthikeyan Nagaraj

Karthikeyan Nagaraj

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3 min read

Jun 24, 2023

32
Introduction:

In today’s digital age, protecting sensitive data is crucial. Cyber threats are growing more sophisticated,
and organizations need robust solutions to safeguard their cryptographic keys and ensure secure key
management.

Hardware Security Modules (HSMs) provide an effective hardware-based security solution.

In this article, we will dive into the world of HSMs, exploring their features, applications, and the
benefits they offer for strengthening data security.

Understanding Hardware Security Modules:

Hardware Security Modules, or HSMs, are specialized devices designed to secure cryptographic keys and
perform key management functions.

Unlike software-based solutions, HSMs offer a physical hardware barrier, adding an extra layer of
security to sensitive data.

Features and Capabilities of HSMs:

HSMs come packed with a range of features and capabilities that make them highly secure and reliable:

Secure key storage and management: HSMs provide a secure environment for storing cryptographic
keys, protecting them from unauthorized access.

Hardware-based encryption and decryption: HSMs offload cryptographic operations to dedicated

hardware, ensuring fast and efficient processing while maintaining security.

Support for cryptographic algorithms and standards: HSMs are built to comply with industry standards
and support a wide range of cryptographic algorithms, such as RSA, AES, and ECC.

Physical and logical security measures: HSMs incorporate tamper-resistant designs, including physical
hardening and tamper detection mechanisms, to protect against physical attacks.
Integration with existing security infrastructure: HSMs can seamlessly integrate with other security
components, such as certificate authorities and secure communication networks.

Applications of HSMs:

HSMs find applications in various industries and sectors:

Financial institutions and payment processing: HSMs are crucial for securing transactions, protecting
sensitive financial data, and complying with regulatory standards.

Public Key Infrastructure (PKI) and certificate authorities: HSMs play a vital role in secure key generation,
storage, and certificate signing, ensuring the integrity and authenticity of digital certificates.

Cloud service providers and data centers: HSMs help secure cloud environments by protecting
encryption keys and ensuring data confidentiality for customers.

Government and defense organizations: HSMs are used to secure classified information, protect critical
infrastructure, and enable secure communications.

Healthcare and electronic medical records: HSMs safeguard patient data, ensuring privacy and
compliance with healthcare regulations.

Secure communication networks and VPNs: HSMs provide secure key exchange and encryption for
virtual private networks, protecting sensitive communication.

Benefits of Hardware Security Modules:

Implementing HSMs offers several advantages for organizations:

Enhanced data protection and confidentiality: HSMs provide a secure environment for cryptographic
operations, safeguarding sensitive data from unauthorized access.

Protection against key theft and unauthorized access: HSMs protect cryptographic keys and prevent
them from being compromised or stolen.

Compliance with industry regulations and standards: HSMs help organizations meet regulatory
requirements and maintain compliance with industry standards, such as FIPS 140–2.

High performance and scalability: HSMs are designed for high-speed cryptographic operations and can
scale to meet the demands of growing businesses.

Simplified key management and lifecycle management: HSMs centralize key management, making it
easier to generate, store, and rotate cryptographic keys securely.
Auditability and tamper-evident logs: HSMs provide detailed logs and audit trails, enabling organizations
to monitor and detect any suspicious activities.

Conclusion:

Hardware Security Modules (HSMs) offer a robust hardware-based security solution for protecting
cryptographic keys and ensuring secure key management.

By leveraging the features, applications, and benefits provided by HSMs, organizations can strengthen
their data protection strategies and mitigate the risks associated with cyber threats.

As technology advances and threats evolve, HSMs will continue to play a crucial role in securing sensitive
information and maintaining the integrity and confidentiality of data.

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