Just like in any other technology, criminals are turning the cryptocurrency sector to their advantage. These criminals are using cryptocurrency, a legitimate technology, to advance their illicit activities.
Bitcoins and other digital currencies are, therefore, a frequent target for many criminals. Attackers focus their target on cryptocurrency wallets or even crypto exchanges. For instance, if criminals succeed in a particular crypto exchange heist, they can get hold of millions of dollars worth of virtual currencies.
Some exchanges, such as the Japanese Coincheck, lost nearly 500 million Euros in 2018. Additionally, in 2019, ten successful crypto exchanges heist occurred, where a loss of $ 281 million got recorded.
How Criminals Acquire Cryptocurrency Illegally
There are various ways in which criminals get cryptos from their illicit activities. One way is through Ransomware, whereby they demand bitcoin. Also, buyers and sellers of illegal products and services, such as firearms, illegal narcotics, stolen databases, and malware mostly depend on cryptocurrency because it enables transactions.
Darknet markets also depend on cryptocurrencies, and even sometimes, they offer escrow services that hold a buyer’s payment to a seller; until the buyer receives their goods.
Cryptocurrency criminals have used tumbling for a long time, that is, a third-party service or technology to launder bitcoins. They do this by attempting to mix digital currencies by routing them between several addresses.
Lately, criminals started using a legitimate concept known as Coinjoin. This Coinjoin gets offered by Samourai and Wasabi and is sometimes built into cryptocurrency wallets as a feature. In Coinjoin, the users agree to mix their virtual currencies while paying for separate transactions, making transactions challenging to trace.
Mitigating Cryptocurrencies’ Cybercrime
Investigators can trace stolen cryptocurrencies. However, law enforcement noted the rise of more privacy-focused cryptocurrencies, including Monero, Zcash, and Dash, making tracing hard.
Governments are trying to make exchanges incorporate up-to-date anti-fraud and anti-money-laundering tactics to discourage the flow of illicit cryptocurrency funds. These tactics include KYC, know your customer rules. Additionally, some government agencies, such as the US internal revenue service, are investing in new tools for tracking transactions such as the cryptocurrency ones. According to Europol’s report, cryptocurrency exchanges are also increasingly flagging suspicious users and transactions.
Cryptocurrency ATMs, the ways to privately obtain and sell cryptocurrencies, are also improving. Many of them require customer identification and also flag suspicious transactions.
From the above context, it is a fact that criminals are finding new ways each day to lure cryptocurrency enthusiasts off their virtual currencies. However, the above-discussed mitigation moves will help monitor illicit crypto transactions. The mitigation strategies will also give authorities a better position to track and destroy criminal enterprises and activities.