Pierluigi Paganini
April 26, 2024
Cryptocurrencies have revolutionized the financial world, offering new investment opportunities and decentralized transactions. However, as cryptocurrencies have grown in popularity, there has also been growing concern about cybercrime involvement in this sector.
The natural ambiguity of cryptocurrencies
Cryptocurrencies, like Bitcoin, are decentralized and pseudonymous, which makes them a breeding ground for criminal activities. Indeed, while anonymity provides privacy and security for transactions, it can also be exploited by criminals for illicit activities, such as money laundering, drug trafficking, illegal arms sales, and terrorist financing. Cybercrime is no longer limited to simple cyberattacks, but has evolved into a form of organized crime that exploits cryptocurrencies for activities such as money laundering and corruption, finding vast and attractive new territory in the darkweb. Here, cybercrime can operate with greater freedom, exploiting the anonymity and irreversibility of cryptocurrency transactions.
Cryptocurrency transactions are used by cybercrime for various purposes, taking advantage of certain characteristics inherent in the very nature of cryptocurrencies such as anonymity, irreversibility, difficulty of traceability, ease of transactions, and the variety of cryptocurrencies in circulation.
Emerging threats
Cybercrime often exploits precisely the lack of regulation and centralized controls of cryptocurrencies to deceive investors and embezzle funds through various forms of phishing, investment scams, digital wallet theft, ransomware, and illegal mining. In particular, ransomware, which encrypts users’ data and demands a cryptocurrency ransom for their release or to avoid a dataleak, is becoming increasingly prevalent, causing financial and operational damage to individuals and businesses worldwide.
Money laundering via cryptocurrency
Money laundering through cryptocurrencies has become a worrisome practice followed by cybercrime. Criminals create cryptocurrency wallets using randomly generated digital addresses or services that offer a greater degree of anonymity. They may also use tumbling services (https://en.wikipedia.org/wiki/Cryptocurrency_tumbler) to mix cryptocurrencies from different sources and cryptocurrencies designed to provide greater anonymity, such as Monero or Zcash, which implement advanced techniques to hide transactions.
They may also seek to minimize interaction with exchange platforms that may impose KYC (Know Your Customer, (https://en.wikipedia.org/wiki/Know_your_customer) and AML (Anti Money Laundering, (https://en.wikipedia.org/wiki/Anti%E2%80%93money_laundering) rules. Money laundering can also involve fraudulent investments, where criminals use illegally obtained cryptocurrencies to participate in fake ICOs (https://it.wikipedia.org/wiki/Initial_coin_offering) or to buy digital assets.
Cryptojacking
Cryptojacking, an illicit activity in which third-party resources are exploited without authorization to mine cryptocurrencies, is another significant threat that also jeopardizes the security of the devices involved. Compromised websites and malware are often at the root of these types of attacks. Specifically, the most common forms of cryptojacking involve the use of hidden scripts in websites or online ads, malware, and infected applications.
The fight against cybercrime
Government authorities and financial institutions are stepping up efforts to combat cybercrime in the cryptocurrency sector. Anti-money laundering laws and cybersecurity regulations have been strengthened to monitor and regulate cryptocurrency transactions. In addition, cryptocurrency exchange platforms are implementing more stringent security measures, such as two-factor authentication and advanced encryption, to protect users’ funds.
Educate and protect users and investors
To effectively counter cybercrime, it is essential to understand the nature and techniques used by criminals. Prevention comes through educating users and taking robust security measures to protect their digital assets. Another crucial aspect in the fight against cybercrime in the cryptocurrency world is also investor education. Users must be aware of the risks associated with investing in cryptocurrencies and adopt robust cybersecurity practices, such as using hardware wallets and avoiding sharing sensitive information online. In addition, it is essential that investors do thorough research before making any transactions and consult reliable sources for information on the safety and legality of cryptocurrencies.
Possible mitigations
Cryptocurrencies undoubtedly offer significant benefits, but it is important to recognize and address the challenges associated with cybercrime in this sector. Through a combination of effective regulation, advanced cybersecurity, and investor education, it is possible to mitigate the risks and foster a safer and more reliable environment for cryptocurrency adoption and use.
In this context, therefore, the combination of stricter regulations, advanced technological tools and public awareness can help mitigate the threat. It could be a key strategy to strengthen KYC and AML regulations for platforms and services, regulate ICOs to prevent financial scams, increase information exchange between authorities in different jurisdictions, and collaborate with the financial industry to create security and prevention solutions.
About the author: Salvatore Lombardo (Twitter @Slvlombardo)
Electronics engineer and Clusit member, for some time now, espousing the principle of conscious education, he has been writing for several online magazine on information security. He is also the author of the book “La Gestione della Cyber Security nella Pubblica Amministrazione”. “Education improves awareness” is his slogan.
Follow me on Twitter: @securityaffairs and Facebook and Mastodon
(SecurityAffairs – hacking, Nigerian fraud)
