Posted on June 1, 2020 by Louise Howland
Since Bitcoin was founded in 2009, cryptocurrency has had a tumultuous journey with regards to value and reputation. As a currency that’s not owned by any country, cryptocurrency is outside of economic jurisdiction, and as such is difficult to police. It’s because of this that an estimated £4 billion was laundered through cryptocurrencies in 2018, in Europe alone. Read on to understand more about the risks of cryptocurrency and its links with cybercrime.
Cryptocurrency is digital currency, as opposed to fiat money. Cryptocurrency has fluctuating monetary value and can be exchanged for cash or used to buy products from suppliers who accept it.
There are several mainstream companies who have started accepting cryptocurrency as a means of payment. Microsoft accepts Bitcoin for purchases on Xbox; KFC in Canada accept Bitcoin; and it’s even possible to buy flights on Expedia with Bitcoin currency too. These are just a handful of example companies that accept cryptocurrency, but over time it’s likely that others will follow suit if it becomes increasingly popular and trusted.
Although most people associate cryptocurrency with Bitcoin, there are in fact a huge number of other cryptocurrency alternatives being created every day. It’s a fluid market, and the only way a new provider will survive is if they have something to offer that other providers don’t, such as speedy transactions or higher anonymity. In addition to Bitcoin, some of the most well-known cryptocurrency companies are:
The risks of using cryptocurrency are to do with its market volatility. That means it’s often unpredictable and its value and forecasting is often changing and never stable for long. When the market speculates about cryptocurrency, it’s often associated with high-risk and this sense of unpredictability.
This simply refers to how cryptocurrency is unpredictable on the market and its price can sharply change for better or worse.
Cryptocurrency is currently unregulated by governments and central, recognised banks alike. This is something that has created a conversation in recent memory, with some asking if it’s a virtual currency or something else entirely.
Cryptocurrencies are open to all sorts of error, manmade or from a malicious outsider. Cryptocurrency are hard to hack, but where they are stored, in virtual banking, is an easier target.
Many have cited that cryptocurrencies can seem backward. They are often thought to make cybercrime, money laundering, and financing nefarious activity easier – and without proper regulation.
The main reason that cryptocurrency is attractive to cybercriminals (and criminals of all kinds) is that it falls outside of the jurisdiction of worldwide economic regions. This means that it’s difficult to police. It can also be 100% anonymous because no identification is required to set up a cryptocurrency company, or a cryptocurrency account. While there are various ways that users can be discovered, such as if an investigator has access to users’ digital information, cybercriminals who use cryptocurrency are likely to be aware of how to get around this.
There are two main ways in which cryptocurrency is used in crime – for large scale, international wrongdoing, and for smaller-scale crime such as financial scams and illegal purchases.
Because no identification is needed when using cryptocurrency, it’s possible to use it to make anonymous payments. Additionally, because cryptocurrency lies outside of economic jurisdiction, it is not taxable. This means that large amounts of money can be transferred – untaxed – to make payments for illegal activity such as terrorism and influence over political elections.
When it comes to smaller-scale crime, cryptocurrency is most commonly used for the online purchase of illegal goods, such as narcotics. In the past, those who operate in this space have created different websites on the dark web, such as Silk Road and Silk Road 2, after the original was taken down. On websites such as this, the use of Bitcoin and other online currencies are common because of their anonymity.
There are many different views on the ways in which cryptocurrency and crime can be combated. Some argue that it should be banned altogether, so that it’s no longer possible to make untraceable, illegal purchases. Others, however, say that cryptocurrency should be better integrated into society. If governments and cryptocurrency creators can work together to find a way to allow its use to be properly policed, then there should be no reason why cryptocurrency should be any different to making any other financial transaction online.
As of 10th January 2020, the EU has introduced the Fifth Anti-Money Laundering Directive, which lays out rules and regulations surrounding how cryptocurrency can be used. It stipulates that all EU member states must follow ‘Know Your Customer’ rules, which monitor transactions and file reports if there is any suspicious activity.
Similar legislation is already in place in other regions across the world and is designed to limit the improper use of cryptocurrency. The law only goes so far, however, because of the fact that cryptocurrency accounts can still be anonymous.
According to a study carried out at the University of Sydney, around $76 billion of annual illegal activity involves Bitcoin – which is 46% of all Bitcoin transactions. This staggering figure indicates the severity of the problem and shows that the use of cryptocurrency all over the world needs to be properly considered and policed. Without global governmental intervention, it is unlikely that cybercrime with cryptocurrency will decrease. It’s still too easy to use cryptocurrency for illegal activity, which is why the value of this kind of currency is so unstable. If you are considering accepting cryptocurrency at your business, find out more about improving your cybersecurity and about strengthening your human firewall, in order to detect any wrongdoing.Find out how you can improve your cybersecurity