CRYPTOCURRENCIES AND CRIMES
In Neptune’s Brood a sci-fi novel by Charles Stross,set in AD 7000, Homo sapiens are extinct and all the characters are androids .In that part of the galaxy, interstellar money is entirely cryptocurrency which goes by the name of “bitcoin”. If so ? Is that an indication that cryptocurrencies will reign in future ?
Bitcoin is the most disruptive invention since the Internet. I believe, future cryptocurrencies like bitcoins could be the future of our global economic system. It would be like having our own bank in our mobile phones. We wouldn’t need banks and third-parties, we would be able to send money around the world without worrying about governments, exchange rates and other problems inherent in our current financial world. Many today want to escape a banking system that they feel is dishonest and inherently unfair. Bitcoins could well be the answer.
Cryptocurrencies are recent in origin. Bitcoin was the first cryptocurrency. It was invented in 2009, by a mysterious person or a bunch of persons making use of the name Satoshi Nakamoto. It was released as a open-source software which could be sent from user-to-user on the peer-to-peer bitcoin network without the need for go-betweens.
In 2010, the first known business transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John’s pizzas for 10,000 bitcoin. After early testings of transactions, the first major users of bitcoin were dark-net markets, such as Silk Road.
Jordan Kelley, founder of Robocoin, launched the first bitcoin ATM in the United States on 20 February 2014. The kiosk installed in Austin, Texas is similar to bank ATMs. A cafe in London installed the country’s first Bitcoin ATM machine which takes money and dispenses Bitcoin which is then used to buy cakes and coffees. A Boston-based online restaurant “Foodler”, accepts payments in bitcoins, and is doing about $15,000 in Bitcoin food orders per month.
Bitcoins get created or are “mined” by cracking outrageously complicated mathematical equations, requiring immense computing power as a reward for a process known as mining. Cryptocurrencies adopt different approaches when it comes to managing supply, but many of the popular ones, including Bitcoin and Ethereum, are “mined” only up to a fixed number. For example, only twenty-one million Bitcoins can ever be mined; nearly seventeen million have been so far.
Already, the power used to mine bitcoin around the world takes up more energy than 159 individual countries. And each bitcoin transaction uses the same amount of energy required to power a US household for nine days, according to Digiconomist.The sheer amount of computing power and energy required to run the bitcoin economy means that the surging prices could literally be damaging our planet, experts have warned. And as the price of the cryptocurrency surges, that problem is likely to get worse.
Cryptocurrency users send funds anywhere in the world like emails between wallet addresses on the blockchain without any transaction fees. Imagine two users, Ram and Sunil. If Ram wants to send one Bitcoin to Sunil, he must know the address of Sunil’s Bitcoin wallet. Ram then uses his private key to securely sign a transaction containing Sunil’s wallet address and the amount to be transferred. Ram then sends the signed transaction to the Bitcoin network, where it is confirmed across the blockchain by “miners” and recorded into a transaction “block.” Once this occurs, the transaction is complete. Anytime a transaction takes place, it is recorded forever in a public ledger known as the “blockchain,” which ensures no duplicate transactions are permitted.
The majority of the people purchase Bitcoins on external exchanges with conventional currencies, such as dollars or euros, or with plastic moneys. The exchange rates against the dollar for Bitcoin oscillate wildly. For example, the price of a single Bitcoin was just a few U.S. dollars in 2012, but it spiked to more than $19,000 in December 2017. This has made cryptocurrencies a popular speculative asset.
FBI owns the single largest Bitcoin wallet on the internet. After the FBI brought down the darknet market Silk Road, it started seizing bitcoins belonging to the Dread Pirate Roberts – the operator of the darknet marketplace, an American man by the real name of Ross Ulbricht. The FBI now controls more than 144,000 bitcoins that reside at a bitcoin address which are worth close to $100 million.
Cryptocurrencies by facilitating a digital and anonymous payment mechanisms, have eased the way for the growth of ‘darknet’ marketplaces in which illegal goods and services are traded. It has also created significant regulatory challenges, including the use of cryptocurrencies in black markets of drugs, hacks and thefts, illicit pornography, even murder-for-hire, including it’s potential to fund terrorism, launder money, and avoid capital controls.
Cryptocurrencies have grown rapidly in price, popularity, and mainstream adoption. The total market capitalisation of bitcoin alone exceeds $250 billion as at January 2018, with a further $400 billion in over 1,000 other cryptocurrencies.
It’s been noticed that, illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity. The estimated 24 million bitcoin market participants that use bitcoin primarily for illegal purposes as on April 2017, annually conduct around 36 million transactions, with a value of around $72 billion, and collectively hold around $8 billion worth of bitcoin.
The cryptocurrencies could be used to finance terrorism if it is not counteracted effectively. Mikko Hypponen, the chief research officer for anti-virus vendor F-Secure, based in Helsinki, Finland, cautions that the Islamic State, better known as ISIS or ISIL, could get funded, to some extent by bitcoins. “ISIS also operates sites in the deep Web – Tor hidden services – that are appealing for donations for the Islamic State in bitcoins.” In 2016, an Islamic State-associated Darknet site called Isdarat, accessible through The Onion Router (Tor) browser, was discovered to have sought bitcoin donations from supporters.In June 2015, a US court convicted Shukri Amin, a 17-year-old from Virginia, for providing monetary support to IS. Amin was accused of assisting Islamic State supporters by encouraging people to donate bitcoins to the group through social media platforms. In 2014, reports of Islamic State fighters in Raqqa, Syria using bitcoins for international transactions and for making small or domestic purchases in money transfer offices surfaced. In December 2017, a woman was arrested in New York for procuring $62,000 in bitcoin to send to Islamic State. In 2016, after failing to succeed in her endeavors to join the Islamic State, the woman misled banks to procure loans and multiple credit cards, which she converted into bitcoin and other digital currencies before sending it via Pakistan, China, and Turkey to fund the terrorist group. Prosecutors accused the woman of fraud and providing material support to a terrorist organization.
Although Bitcoin makes it possible to exchange money without anyone knowing who is sending or receiving it, it’s possible to track how the money flows through blockchain as well as other transactions, once someone knows the bitcoin address of the person he is paying. This is because all the transactions are recorded on the block chain. That may be the reason why, bitcoin is becoming less popular with criminals as law enforcement units are getting better at tracking large amounts of the currency linked to criminal activity.
The Bitcoin project never promised absolute anonymity, every blockchain records transactions, as blockchains are transparent and verifiable which means that, if the owner of a wallet becomes known, their transactions, which are public, can be traced back to them. over time, and wallets back to people.Surprisingly,this has not stopped dumb criminals from falling back on Bitcoins for illicit purposes. In fact, there are very few cryptocurrencies in the market that are proficient at concealing the identities of bitcoin users. The Bitcoin project also recommends that users regularly change their pseudonyms to foil tracking.
Now, bad actors have taken to coins such as Monero, which are designed to prevent tracking. For instance, in December 2017, hackers held as many as 190,000 WordPress sites per hour for ransom for Monero. But because of their association with criminal activity, these currencies are unlikely to gain the legitimacy associated with other digital assets.Researchers have now found that even Monero does not offer water tight anonymity.
Besides, tracking illicit digital transaction has become easy today with Chainalysis cryptocurrency investigation software which helps law enforcement and financial institutions identify and stop bad actors who are using cryptocurrencies for illicit activity such as fraud, extortion, and money laundering. It enables police to track the delivery points of ransom payments and identify criminals withdrawing their illegally procured funds at an exchange. Chainalysis Reactor is also enabling its users to easily conduct in-depth investigations into the source and antecedence of cryptocurrency transactions.
Three researchers at University of Luxembourg have disclosed that they have identified techniques that can be readily used to verify the identity of anonymous Bitcoin users for between 11 percent and 60 percent of all Bitcoin transactions. Deanonymising a Bitcoin user means linking their nom de plume – which serves as a public key – to the IP address from which they trade bitcoins. In order to achieve this, the researchers have informed that they only require $2,000 worth of equipment. The researchers also say they can defeat users who endeavor to disappear behind firewalls or network address translation. By “abusing” Bitcoin countermeasures designed to block distributed-denial-of-service attacks, the researchers say they can also unmask up to 60 percent of Bitcoin users who employ the Tor anonymizing network in an effort to mask their IP address.The deanonymizing method opens up new ways for law enforcement agencies to tie transactions to an IP address, and perhaps back to the identity of a criminal.
Beyond, cryptocurrencies, there are numerous other forms of digital payments such as Liberty Reserve, E-gold, and WebMoney. Liberty Reserve in particular was accused of laundering more than $6 billion for several years, according to federal prosecutors. Known as the PayPal for criminals,” with no personal account details required,
Liberty Reserve facilitated a broad range of criminal activities across the Darknet, including “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and nar-cotics trafficking.” It is also believed to have played a main part in stealing $45 million from thousands of ATMs in 24 countries in December 2012 and February 2013. Though Liberty Reserve, like Silk Road, was ultimately brought down by the FBI and its founder arrested, many competitors have burgeoned out in its place.Which promise not just pseudonymity but also completely untraceable anonymity. One such new currency, Darkcoin, has been created specifically to confuse users purchases by combining any single transaction with those of other users so that payments cannot be tied to any particular individual. The popularity of Darkcoin is increasing rapidly, and its value has spiraled up from seventy-five cents a coin to almost $7 shortly after its introduction.Another tool, Darkwallet, created by an organization referring to itself as unSYSTEM, is known to enable”hyper-anonymized” transactions.
The legal status of cryptocurrencies differs from country to country. It’s nebulous in many and changing in many of them. Some countries have permitted their use while others have either restricted their use or totally banned it. A total ban on trading or using cryptocurrencies has been brought into force in eight countries: Algeria, Bolivia, Egypt, Iraq, Morocco, Nepal, Pakistan, and the United Arab Emirates. A tacit ban exists in another 15 countries, which include Bahrain, Bangladesh, China, Colombia, the Dominican Republic, Indonesia, Iran, Kuwait, Lesotho, Lithuania, Macau, Oman, Qatar, Saudi Arabia and Taiwan. In August 2018, the Bank of Thailand announced its plans to create its own cryptocurrency, the Central Bank Digital Currency (CBDC). China Central Bank banned the handling of bitcoins by financial institutions in China in early 2014.
Many of the largest U.S.-based exchanges, including Coinbase and Gemini, adhere to strict know-your-customer and anti–money laundering requirements by collecting identifying data from their users, which makes it challenging for criminal groups to convert their cryptocurrency into hard currency.
Russia, Iran and Venezuela have used cryptocurrencies to evade economic sanctions. Russia and Iran met and strategised the methods of bypassing the global SWIFT system through decentralized blockchain technology. Russia assisted Venezuela in creating a national cryptocurrency called El Petro to circumvent US sanctions.
Finally, like the bitcoins in the financial world , humans don’t need intermediaries to establish a spiritual connection with inner divine selves. We all can find our way through. Further, taking the analogy of Metcalfe’s law, if 1000 persons using bitcoins grow to 100000 and from there convert to ten billion. That will decentralise banking systems totally and bring transparency. Quite similarly, if 1000 people practising meditation were to increase exponentially to 10 billion people, that would create a new world re-wiring the consciousness of the world as a whole.
Source from: epaper/deccanchronicle/chennai/dt:28.01.2019
Dr.K. Jayanth Murali is an IPS Officer belonging to 1991 batch. He is borne on Tamil Nadu cadre. He lives with his family in Chennai, India. He is currently serving the Government of Tamil Nadu as Additional Director General of Police, DVAC.
