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From Speculation To Darknet Transactions And Ransomware, Here Are 8 Types Of Cryptocurrency Transaction
NEW DELHI: Even though the Bitcoin bubble has long since burst, increasingly desperate cryptocurrency (crypto) supporters continue to extol the virtues of the technology’s bright future.
Given crypto’s lack of intrinsic value beyond the cost of mining it, such exhortations appear to be little more than desperate ‘hodlers’ (holders of crypto) looking to boost its speculative value.
However, speculation, our number #1 crypto transaction type, is far from the only reason to conduct crypto transactions.
Darknet Transactions are the number 2 type of cryptocurrency transaction.
The Darknet is comprised of areas of the internet that are inaccessible to standard search engines – those dark corners of the internet where purveyors of contraband ranging from illegal drugs to child pornography conduct business.
Indeed, without cryptocurrency, the Darknet would be a mere shadow of its current self – and Bitcoin remains the coin of the realm. According to the US Drug Enforcement Agency’s (DEA) 2017 National Drug Threat Assessment Report, “Bitcoin is the most common form of payment for drug sales on darknet marketplaces and is emerging as a desirable method to transfer illicit drug proceeds internationally.” “Because of its longevity and growing acceptance at legitimate businesses and institutions around the world, Bitcoin is the most widely used virtual currency.”
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Money Laundering is the number 3 type of cryptocurrency transaction.
Today, despite (or perhaps because of) dramatic improvements in anti-money laundering (AML) regulatory enforcement, the majority of money laundering activity has shifted to cryptocurrency. In its report Cryptocurrency Anti-Money Laundering Report 2018 Q3, CipherTrace Cryptocurrency Intelligence writes, “97 percent of criminal Bitcoin directly received by [crypto] exchanges flowed into those Located in countries with weak AML laws.” “Cryptocurrency exchanges in countries with lax anti-money laundering regulations receive nearly 5% of their payments directly from criminal sources.”
Given China’s capital-movement restrictions, crypto has grown in popularity as a means of evading its laws. “CUBS [Chinese Underground Banking Systems] money brokers sell Bitcoin to drug traffickers in the United States, Australia, and Europe in exchange for cash earned from drug sales.” According to the DEA report, “this drug cash is then sold to Chinese nationals in exchange for Bitcoin, which Chinese nationals use to transfer the value of their assets outside of China.” “Many Chinese companies that manufacture goods used in TBML [Trade Based Money Laundering] schemes now prefer to accept Bitcoin.” Bitcoin is very popular in China because it can be used to transfer money anonymously across borders and avoid taxes.
Ransomware is the number 4 type of cryptocurrency transaction.
Although ransomware is less popular than cryptojacking, it is still a powerful form of criminal extortion – and it is now easier than ever. “Easy-to-use ‘ransomware as a service’ can be purchased cheaply on the Darknet, and at least one vendor provides customer support for users of its malware,” writes Michael Baker, Founder and Principal at Mosaic451, a bespoke cybersecurity service provider and consultancy and member of the Forbes Technology Council. “Would-be hackers who don’t want to buy off-the-shelf ransomware can hire black-hat coders to create custom ransomware.” All of these services are purchased and sold in the form of cryptocurrency.
Crypto Transaction Type #5: Evading Sanctions
It’s no surprise that countries like North Korea are desperate for hard currency – and crypto gives them one avenue to obtain it. “Crypto-currencies have the added advantage to the DPRK [North Korea] of giving them more ways to circumvent US sanctions,” according to Lourdes Miranda, cryptocurrency analyst and financial crimes investigator at MirandaFinIntel Consulting, and Ross Delston, an attorney and certified AML specialist who frequently serves as an expert witness. “DPRK can create their crypto-currencies or use established ones like Bitcoin. Having their crypto-currency would also facilitate their ability to open online accounts under the guise of a non-adversarial nation using anonymous communication to conceal the user’s locations and usage on the internet.”
Moreover, while the United States and many of its allies have sanctions against countries such as North Korea and Iran, there are also economic sanctions against much larger economies such as Russia that motivate Mr. Putin’s empire to make significant investments in cryptocurrency.
Such investments are made at the national-state level. “[The] Russian government is about to take a step to start diversifying financial reserves into Bitcoin because Russia is being forced by US sanctions to dump US Treasury bonds and [take] back US dollars,” says Vladislav Ginko, an economist at the Russian Presidential Academy of National Economy and Public Administration, which is ironically funded by the Russian government itself. “These sanctions, combined with Russia’s desire to adopt modern financial technologies, have led Russia to invest its reserves in Bitcoin.”
Crypto Transaction Type #6: Theft of Cryptocurrency
Money laundering, ransomware, and state-sponsored sanctions evasion all have a James Bond vibe to them, but what about simple theft? According to the Cryptocurrency Anti-Money Laundering Report 2018 Q3 by CipherTrace Cryptocurrency Intelligence, “CipherTrace revealed a three-fold increase in cryptocurrency thefts during the first half of 2018 compared to the entire year of 2017.” “According to CipherTrace, this trend will bring the total amount stolen and reported in 2018 to well over $1 billion by the end of [2018].”
The FBI has issued a warning about a type of theft that is targeting holders of small amounts of cryptocurrency. According to the FBI Public Service Announcement I-032818-PSA from March 2018, “virtual currency is increasingly being targeted by tech support criminals, with individual victim losses often in the thousands of dollars.” “Victims contact fraudulent virtual currency support numbers, which are typically found through open-source searches.” The fraudulent support requests access to the victim’s virtual currency wallet and move the victim’s virtual currency to another wallet for temporary storage while maintenance is performed. The victim’s virtual currency is never returned.”
Crypto Transaction Type #7: Crypto Infrastructure Hacking
Why steal cryptocurrency when you can simply print more for yourself? That’s exactly what a specific group of criminals accomplished earlier this year by exploiting flaws in Ethereum Classic, the second most popular cryptocurrency after Bitcoin. “We observed repeated deep reorganisations of the Ethereum Classic blockchain, the majority of which contained double spends,” says Coinbase Security Engineer Mark Nesbitt. “The total value of the double spends observed so far is 219,500 ETC ($1.1M).”
Double spending entails taking the same unit of cryptocurrency and spending it twice – the online equivalent of running your dollars through a bank.
Let us not forget the eighth type of crypto transaction: legal transactions in which crypto is exchanged for goods and services, just like real money.
Some crypto enthusiasts would have you believe that using cryptocurrency at your local coffee shop – or even sending funds to relatives in Venezuela to buy food there – will be the most common use of cryptocurrency soon.
Don’t be fooled. “Cryptocurrencies will likely become a larger part of the cybercrime realm,” says Yaya Jata Fanusie, director of analysis at the Foundation for Defense of Democracies’ Center on Sanctions and Illicit Finance. “Any police or intelligence agency dealing with cyber issues should expand their knowledge of cryptocurrencies and blockchain technology.”
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