The indictment filed on June 13, 2018 is perhaps the most popular and realistic argument against cryptocurrency, that it enables anonymous transactions globally and at scale, no exception made for Russian intelligence or ISIS. So the news that a prominent and controversial technology was used to fund state-sponsored cyber-attacks will not be passed by its critics.
In the released indictment, prosecutors assert that the 12 named intelligence officers hacked computer networks and email accounts owned and used by the U.S Democratic Party, including the presidential campaign of Democratic candidate Hillary Clinton.
The details were included under a charge of conspiracy to launder money. According to the indictment, the defendants “conspired to launder the equivalent of $95,000 through a web of transactions structured to capitalize on the perceived anonymity of cryptocurrencies such as bitcoin”
“In an effort to pay for their efforts around the world, the defendants paid for it with cryptocurrency,” deputy U.S Attorney General Rod Rosenstein said during a press briefing.
While the defendants allegedly used other currencies, including the U.S dollars, “they principally used bitcoin when purchasing servers, registering domains, and otherwise making payments in furtherance of hacking activity.” Payments are said to have been made to companies in the U.S with some of those funds being traced to a bitcoin mining operation.
But this knee-jerk criticism is misguided and hypocritical for several reasons:
Firstly, it is not as anonymous and mysterious as critics make out. The details in the indictment actually provide an interesting example of the limits of cryptocurrency’s ability to obscure its users’ activities.
The painstaking research of the special investigator’s team revealed the approximate amounts and methods involved, although addresses are not tied to identities, it is far from impossible to establish ownership, not that they didn’t try, as the indictment showed. But the process of laundering becomes difficult when there is an immutable, peer-maintained record of every penny being pushed around. Small slip-ups in the team’s operational security allowed investigators to tie, for example, an email address used to access a given bitcoin wallet with the one used to pay for a VPN.
It is likely that the very same distributed ledger technology that allows for anonymous international payments in the first place also creates an invaluable investigative tool for those savvy enough to take advantage of it. So although bitcoin has its shady side, it’s far from perfect secrecy, especially when exposed to the privileges of a federal investigative team.
Secondly, Cryptocurrency doesn’t provide much in the way of new capabilities for those who wish to keep secret their activities online.
Money laundering is performed at huge volumes worldwide and there are shady banks, loopholes and puppet organizations peppered across the globe. Cryptocurrencies are convenient for paying for things online because there are a number of vendors that accept it straight, or if one is not available it is reasonably liquid and can be shifted easily.
If anything, these indictments are evidence that cryptocurrency is here to stay and is usable just like any other financial instrument.
Thanks very interesting blog!