Bitcoin stays dirty? All you need to know

For some public prosecutors or authorities, the price rally on the crypto markets could still become a lucrative business. In the USA, the US Marshals Service, an agency of the Department of Justice, has even commissioned its broker, who will store the Bitcoin in the future. In this way, the authority can benefit from future price increases. German public prosecutors are also sitting on Bitcoin and other cryptocurrencies worth millions they have confiscated.

Bitcoin is still firmly anchored in the dingy corners of the financial world. But, how much, that was only recently shown in the USA. When rumours circulated almost two weeks ago that the government around President Joe Biden could take strict action against money laundering in the future, the cryptocurrency lost around 15 per cent in value.

The accusation: Because trading in digital coins is anonymous mainly, Bitcoin enables illegal transactions outside of the regulated financial market. Experts such as Interpol boss Jürgen Stock are concerned that Bitcoin is repeatedly at the centre of digital crimes. “Cryptocurrencies are used in ransomware attacks,” says Stock in an interview. Such software attacks are now often used to blackmail companies. “Then the IT of a company is paralyzed,” says Stock. The ransom demanded access to the IT systems is often demanded in bitcoin, says Stock in the WirtschaftsWoche podcast “Head Talk”.

The Federal Criminal Police Office (BKA) also notes that cryptocurrencies are becoming increasingly crucial under criminal law. “They offer the perpetrators enormous advantages, such as global availability and fast transactions,” the BKA said on request. It is a high degree of anonymity, especially on the Darknet. “Due to this high level of attractiveness for the perpetrators, cryptocurrencies are identified in almost every investigation in ​​cyber crime. It is now used in the narrower sense, and colleagues are being trained for the appropriate evaluations,” says the BKA. That is why the authority set up its cybercrime department last year.

But how anonymous are bitcoin transactions anyway?

What is also part of the overall picture is that the more Bitcoin and other cryptocurrencies arrive as an asset class in society, the smaller the proportion of crypto coins used for dirty business. According to a recent study by analytics portal Chainalysis, $10 billion worth of cryptocurrencies were used for illegal purposes in 2020. Last year, illicit transactions accounted for more than $20 billion in cryptocurrency, over two per cent of the total market. “Crypto crime remains a small part of the overall cryptocurrency market and a comparatively minor problem relative to illicit funds in the traditional financial system,” Chainalysis analysts write.

According to Chainalysis, most illegal transactions in 2020 continue to be scams. However, the proportion of extortions using ransomware, i.e. blackmail software, which Interpol boss Jürgen Stock also refers to, has increased significantly by more than 300 per cent compared to the previous year. In addition, Chainalysis points out that the actual numbers are probably much higher since not all cases of ransomware attacks are documented.

The “washing” of the extorted bitcoins, i.e. the reintroduction of the crypto coins into the established financial system, is highly specialised, says Interpol boss Stock in the “Head Talk” podcast. Just as experts use software to penetrate a company’s corporate network, related services are on the other side. “They convert Bitcoins into cash, for example, and then let the cash flow into the legal economic cycle,” says Stock. “These are sometimes hazardous operations,” says the Interpol boss in the podcast, as they offer the possibility of criminal prosecution. However, that’s just part of the “cybercrime as a service” package, says Stock. If you don’t want to or can’t do something yourself, you can hire someone else to do it.

The BKA also refers to this. Internet-based payment services providers and so-called exchangers, which form a kind of “electronic exchange office” for digital currencies and change to conventional means of payment for a fee, could be used for criminal money laundering activities.

There are so-called “mixers”. These are anonymous tools that mix cryptocurrencies of different origins. It makes it nearly impossible to trace the cryptocurrency. Although many authorities now have programs to trace such mixtures, it is not easy.


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