In our last article, we explored some recent ransomware attacks and the possible ways organisations can respond to the increasing threat of cyberattacks. The trends are clear and should cause concern; the first half of 2021 has brought an increase of hugely disruptive ransomware attacks.
Now we turn our attention to an aspect of these attacks that is often overshadowed by the havoc they wreak: the gains cyber gangs make from upending the lives of thousands. The demands these criminals make almost exclusively specify payment in cryptocurrencies. Moving money on this scale, and with barely any trace used to be practically impossible, even in loosely regulated markets. With the advent of crypto, cyber gangs gained an invaluable tool in financing their exploits.
With Bitcoin, transactions are fast, easy, largely anonymous, and hard to trace.
The rise of cryptocurrencies, and Bitcoin in particular has been a contentious issue. On one hand, cryptocurrencies are decentralised tools that have enabled people all around the world to save their funds from runaway inflation or conceal transactions from authoritarian regimes. Also, they provide an outlet for people to create communities, gamble, in a way, make some easy money, or just have fun with their friends online. On the other hand, the crypto world is an unregulated, unsupervised mess that follows its own rules, where actors are accountable to no one, and is potentially useful to criminals including terrorist organisations.
Privately issued money isn’t a new phenomenon. As Gary Gorton and Jeffery Zhang point it out, the current fluctuating landscape of cryptocurrencies resembles the 19th Century Free Banking Era in the US. During that time, issuing paper currency wasn’t just limited to banks; even drugstores and railroad and insurance companies sometimes issued their own notes. This provided perfect conditions for fraud, money laundering, and counterfeit currencies. Now, with cryptocurrencies, anyone can create their own money—Dogecoin was created to illustrate just how easy it was to do so—and has only to convince others that their coin is worth something.
The Free Banking Era in the US ended with the National Banking Act of 1863 that (among other provisions) established a system of national banks that issued a uniform national currency. An analogous solution is on the rise, in the form of Central Bank Digital Currencies (CBDC). According to the Atlantic Council’s CBDC tracker, 81 countries (representing 90% of global GDP) are in various stages of developing their own central digital currency. The largest players in global banking, the European Central Bank, the Bank of England, the Bank of Japan and the U.S. Federal Reserve, are all looking into digital currencies.
With the enormous expansion of the crypto market, calls for regulation have been on the rise.
What’s a government to do?
National governments, international organisations, as well all those who own cryptocurrency are involved and motivated to find a solution. The obvious course of action would be banning cryptocurrencies altogether. China is already cracking down on crypto users; they’ve banned bitcoin mining, and ordered major banks to cease business with crypto companies. Unfortunately, as is often the case when seeking solutions to complex problems, the obvious answer actually only raises more questions. Experts generally agree that such a ban would be costly to enforce, and put countries that attempt it at a disadvantage.
The rest of the world are following a more cautious route, because both the technical and political aspects of the issue raise difficult questions. Should CBDC’s and cash coexist, or should digital replace hard cash? Should a digital currency be widely available, or only for industry players for certain transactions? Should individuals have a choice in which bank they use, or should accounts be available only with central banks?
In April, Hester Peirce, Commissioner of the US Securities and Exchanges Council said about banning Bitcoin that “it would be a foolish thing for the government to try to do” and “would be missing out on the innovation around Bitcoin and other digital assets if we decided to try to stop them.” Perhaps there is room on the market for CBDS’s as well as other digital currencies.
Also, while it isn’t easy to trace crypto deals, the blockchain maintains a permanent record of all transactions made. That allows agencies and analytics firms with the required resources to eventually find where the money from ransoms paid went. That was the route the FBI took and which led to the recovery of some of the Bitcoin transferred after the Colonial Pipeline attack. In this case, they had luck on their side, too. Only days after Colonial paid the ransom, Elliptic was able to track the wallet to which the payment was made, and discovered that the same wallet had received payments since March totaling $17.5 million. The FBI seized the wallet through a court-approved seizure warrant, and found just over two million dollars’ worth of Bitcoin still sitting there.
This debate is just heating up, as central banks around the world are developing their own currencies, and legislation is being passed to begin to define the crypto sector. Ever since Bitcoin was created, and more so as various currencies were gaining popularity, pundits have predicted everything from phenomenal rise to popping bubbles. Naturally, when experts predict every possible outcome, they’re bound to get it right some of the time.
It isn’t such a leap to say that simply because so many have invested so much into cryptocurrencies, they are bound to survive in some form or another. Dragan Boscovic, director of the Blockchain Research Lab at Arizona State University said that “Central bank authorities are busy developing regulations on cryptocurrency. They recognize that digital currencies are native to the digital economy and, as such, are on their way to becoming mainstream in the next 10 years.”
Cryptocurrencies and their linked technologies are driving innovation right now, and the challenges they inherently present will fuel their evolution in the future. Whatever comes out of that change, some have already predicted it, some will make fortunes on it, and some won’t understand it at all.
The Connective Platform™ integrates a host of cybersecurity tools into one system faster than any of our competitors, but that alone wouldn't give our partners the edge over cybercriminals. Simply gathering all the data from a number of connected elements would still require an army of experts to make sense of it; it's analogous to how gathering stock prices from markets all around the world doesn't tell you where to invest your money next. Our platform goes on to analyse that massive amount of data to give our partners the information they need: where the weak points of their cyber defence are, and how to address them.