Crypto Daily Topic

Cryptocurrency and Crime: How is The International Community Fighting Crypto Crime

Cryptocurrencies were specially designed to give individuals power and control over their finances. But this big vision has been marred by cryptocurrencies’ association with crime. Such a negative perception threatens to derail cryptos from achieving their intended mission as it attracts the attention of governments and other regulatory agencies. 

By hiding behind the decentralized, peer-to-peer, and anonymous nature of Blockchain, many cybercriminals have latched on digital currencies to engage in illegal activities online.

In this article, we explore the parallels between blockchain/cryptocurrencies and crime and how to deal with crypto-crime:

What is the Blockchain?

First popularised by Bitcoin creator Satoshi Nakamoto in 2009, Blockchain is a digital ledger that allows for the creation of immutable, peer-to-peer, and distributed records.

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One of the critical features of blockchains is ‘decentralization’ – which makes them autonomous and independent of third-party control and intervention. Decentralization makes Blockchain not just uncensorable but also eliminates the costs associated with third-party intermediaries. 

Cryptocurrencies were the first and are still the most popular application of Blockchain. And thanks to the highly decentralized nature of Blockchain, crypto transactions are not regulated or audited by government authorities. Blockchain also employs the use of private and public keys, as opposed to real-world identities. This makes it challenging to identify the true identity of the individual behind a particular crypto transaction. 

It’s this anonymity/pseudonymity that makes cryptocurrencies highly attractive to cybercriminals. 

The Rise of Crypto Crime

The rise of crypto crime can be traced back to the early days of Bitcoin and to the infamous Silk Road saga. The now-defunct dark web marketplace hosted all manner of criminals and encouraged such criminal activities as money laundering, illegal sale of drugs and firearms, contract hacking, sale of other contrabands, with transactions being carried out in Bitcoin.

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The site was eventually shut down by the FBI, and its creator – Ross Ulbricht, sentenced to life in prison. Note that while Silk Road employed numerous anonymization techniques, especially the Tor network. But it was the use of Bitcoin for transactions that highlighted how cryptocurrency could be used to fuel illegal online activities. 

Crypto crimes do not always involve a shady website on the dark web. As crypto becomes more popular, the more crypto crime becomes more brazen and high-tech. Today, Most crypto crimes revolve around ICO scams, cryptojacking, ransomware, money laundering, sim-swaps, and Pyramid/Ponzi schemes. While the majority of these incidents prove to be a new normal that the cryptoverse has become used to, others continue to make the headlines.

Crypto Ponzi schemes are best exemplified by the case of OneCoin, a Ponzi scheme that defrauded investors across the globe around $4 billion. The scheme director Dr. Ruja Ignatova is still on the run, but several other conspirators have since been convicted. 

Another high-profile case of SIM swapping involved AT&T and $24 million worth of cryptocurrency. The telecommunications conglomerate is still embroiled in a legal case with Michael Terpin, a Bitcoin investor, who lost $24 million worth of Bitcoin. Terpin said that an AT&T employee at a Connecticut store transferred his phone number to a new SIM card. The action, he says, made it possible for a hacker to transfer crypto funds to a different account.

Not all crypto crimes are cleverly engineered Ponzi schemes or hid behind the veil of technology. Occasionally, you’ll hear of brazen attacks such as the case in Thailand where attackers kidnapped a tourist and forced him to transfer $100, 000 worth of Bitcoin. In Ukraine, the Exmo crypto exchange’s Finance executive was also kidnapped and forced to transfer $1 million in Bitcoin. In New York City, a man lost $1.8 million of Ether after his “friend” organized for him to be kidnapped with the assailant forcing him to reveal his private key. Yet another case occurred in Instanbul when a businessman was taken hostage by armed assailants who forced him to transfer $2.83 million in crypto.

Fighting Back 

The irreversibility and anonymity of blockchain transactions imply that crypto criminals have almost always gotten away with their loot.

But different institutions are continually coming up with mechanisms aimed at pushing back and helping crypto crime victims. And one such company is Chainalysis that has taken up the role of tracking crypto crimes. 

They achieve this by tracking every public address tied to a particular transaction in the Blockchain. Next, they follow the trail of the funds in the particular address and identify whether they’re moving them across other addresses in crypto exchanges or liquidating them for fiat currency. They compare these transactions with the information provided by fraud victims and work with the authorities to track down perpetrators. 

Other companies have created software that gives authorities the upper hand while investigating crypto fraud. This is the approach taken by blockchain company BitFury, whose software enables law enforcement to track down blockchain addresses that have a high inclination for cybercrime. The software is also capable of producing crypto-crime-specific legal reports. 

These companies are fighting back and debunking the myth that crypto crime is permissible just because of the unhackable and anonymous nature of Blockchain.

Renewed Crackdown

As crypto crime persists, countries have put in place stringent measures aimed at clipping its wings. The U.S. is, for instance, planning to crack even harder on the crypto sector. According to the federal budget proposal for 2021, the United States Secret Service will fall back to the jurisdiction of the Treasury. According to the proposal, this move will, among other goals, address the Trump administration’s intention to “address emerging threats such as the use of cryptocurrencies in money laundering and terrorist financing.”

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The proposal states that “technological advancements in recent decades such as cryptocurrencies and the increasing interconnectedness of the international financial market place have resulted in more complex criminal organizations and revealed stronger links between financial and electronic crimes.”

This move is not unprecedented when you consider the comments of high-profile figures with regards to cryptocurrency. Steve Mnuchin, Treasury Secretary, called Bitcoin a “national security issue,” which has been “exploited to support billions of dollars of illicit activity like cybercrime, tax evasion, extortion, ransomware, illicit drugs, and human trafficking.”

Last year, President Trump tweeted that Bitcoin and other cryptocurrencies “can facilitate unlawful behavior including drug trade and other illegal activity…” 

Switzerland also plans to exact stricter measures on the crypto market through the Swiss Financial Market Supervisory Authority (FINMA). The organ plans to inject more transparency into crypto dealings by requiring transactions valued at over 1,000 francs to be accompanied by Know Your Customer (KYC) info. This is a drastic adjustment to an existing regulation that only required KYC requirements for transactions valued over 5000 francs. FINMA argues that this move is set to check the “heightened” risk of crypto-enabled money laundering.

The shift came about a few days after the European Union implemented its fifth Anti-Money Laundering Directive, which requires all crypto companies in Europe to conduct KYC and AML procedures on all their prospective clients. The directive explicitly states that crypto-related businesses must prove that the owners and senior management are “fit and proper.” 

Final Thoughts

While criminals have been inclined to use cryptocurrency due to its ‘untraceable’ nature, this reality is fast changing. Advancing technology plus new ways of looking at blockchain transactions will help crypto shed its reputation as money for criminals. This, combined with austere regulatory policies, will probably be the beginning in restoring the glory that cryptocurrency deserves. 


What is IOTA All About? 

Technology makes our lives easier. And as it is now, we might be at the cusp of a new age as far as technological advancements are concerned. In the very near future, it’s highly probable that the mundane devices around us will be interconnected with each other and to the internet. Think of your fridge, car, oven, car, shower, coffee maker, etc.

These devices will be able to work without needing human intervention. In other words, we’ll be able to derive more value from the things around us, thanks to them being connected to the internet. This phenomenon is called the Internet of Things (IoT). 

It would be ideal if we could actualize IoT without any of the current impediments that face it – with two of the major ones being security and scalability. There is a valid concern that an IoT network would be a security disaster as far as information security, data privacy, and cyber safety are concerned. 

IOTA is a distributed ledger platform that seeks to address the issue of scalability and security for the Internet of Things. What exactly is IOTA, and what does it offer the IoT economy and the distributed ledger space?

What is IOTA?

IOTA is a cryptocurrency project created and optimized for the Internet-of-Things (IoT). The IOTA team envisioned an IoT – already a bold vision by itself – that is powered, secured, and driven by blockchain. David Sostebo, the co-founder of IOTA, wrote that ” IOTA was initiated with a very clear and focused vision of enabling the paradigm shift of the Internet of Things… through establishing a de facto standardized ‘Ledger of Everything.’ 

IOTA diverts from the traditional blockchain model adopted by the majority of cryptocurrencies. Instead, it uses a dedicated distributed ledger platform called Tangle – itself an implementation of a computer science and mathematical concept known as Directed Acyclic Graphs(DAG). Tangle’s consensus mechanism works this way: for new transactions to be valid and before it’s added on the public ledger, it must be validated by the two lastly entered transactions.

This removes the dependence on miners to validate transactions, thus allowing for more scalable transactions (by reducing network congestion and network delays) as compared with traditional blockchains such as Bitcoin’s and Ethereum’s. 

How Does IOTA Work? 

The idea behind IOTA is to integrate blockchain solutions to the Internet of Things. IoT is not a complicated concept or a fantastical idea belonging to sci-fi movies. As a matter of fact, it’s already part of the world’s economy – think devices that monitor factory conditions, driverless cars, smart homes, smart lighting, smart pet care, etc. Research indicates that in 2017, IoT devices had grown up to 8.4 billion, with an even more aggressive growth projected for the future. 

How IOTA Works | Forex Academy

IOTA’s founders believe that for IoT to realize its highest potential, network devices should share and utilize resources more efficiently. The idea is for devices to acquire more resources, such as internet bandwidth, power, storage – only when they need them, and to sell excess or unwanted power at any given time. 

Even the smallest IoT network’s implications would be tens of transactions every second, as devices relay info between and across each other. Such volumes of transactions are beyond the capability of the current blockchain model. For instance, the Ethereum blockchain can handle 15 transactions per second, while the Bitcoin blockchain can handle 7. This results in high transaction fees for priority transactions, while the rest of the transactions can take hours to be completed. As such, the blockchain, as it is, is simply not scalable enough to support the IoT economy. 

IOTA and Scalability

Upon completion, IOTA anticipates having billions of interconnected nodes on its network. To this end, its processing power is designed to expand as more nodes join the network. Tangle’s consensus mechanism dictates that each transaction is linked to two other transactions – in the end, creating a web of transactions based on a verification history. As time goes on, every transaction becomes linked to the ones that verified it. This simple model removes the need for a blockchain. 

In terms of computing power and securing the network, each time a new device submits a transaction – it contributes to the network in this way. Again, this removes the need for block miners. 

IOTA and Transaction Fees

IOTA is also fee-free. As new devices contribute computing power when they submit transactions, the only cost they expend is the electricity they use to confirm the two previous transactions. This essentially makes IOTA free to use. 

This absence of fees is intentional. The IoT network will comprise devices transacting with each other at fractional costs and a very high frequency. Levying charges on such transactions would render micropayments impractical. To serve as the backbone of the IoT economy, IOTA has to be a free network. 

34% Attacks

As you already know, the blockchain is vulnerable to what is known as “the majority attack.” This describes the event when a party manages to control more than 50% of the network (51% attack). In such an event, the attacker can perform malicious transactions, stop miners, and so on. For its part, Tangle will be vulnerable if an entity were to control 34% (over ⅓) of the network’s computing power. 

The IOTA network would be particularly vulnerable to such an attack when it’s still a small network with fewer nodes (i.e., now). It’s easier for a bad actor to gain control of 34% of the network at this time. To curb such an attack, the network is utilizing a Coordinator that synchronizes data across all nodes – cushioning the network against an attack. 

The coordinator node is necessary to protect the early Tangle, and the network plans to get rid of it when it becomes robust and resilient enough. But that also means that the platform is not exactly decentralized right now.

In May 2019, IOTA announced the plan to kill the coordinator and implement ‘Coordicide’ – a new procedure that would make the network decentralized. The protocol, however, is yet to be implemented. 

Who is behind IOTA? 

The IOTA platform was launched in 2015 by David Sønstebø, Dominik Schiener, Sergey Ivancheglo, and Serguei Popov. Sønstebø and Schiener both serve as co-chairman of the board of directors. Ivancheglo departed from the organization’s foundation in June last year in seemingly amicable terms, but as the IOTA community came to discover, there was a ton of intrigue going on behind the scenes. See the full team here

Concerns About IOTA 

IOTA has faced criticism for its use of several new technologies instead of tested and tried technologies. Technology experts question if IOTA will really work to scale and if it will stand up to attacks even after more nodes join the network. 

Michigan University’s Digital Currency Initiative published a paper outlining serious flaws in Curl, the network’s hashing function. After testing the hash function, they discovered it produced the same output when fed with two different inputs – a situation known as Collision and one that denotes a faulty hash code. The team added that a malicious actor could have manipulated the flaw to bring down Tangle or steal user funds. The IOTA team has since addressed the loophole.

Ethereum’s core developer Nick Johnson published a scathing article in which he delineated why he thought IOTA’s platform lacked “good technical judgment,” disregarded “cryptographic best practices,” is “a bad actor in the open-source community,” and that its integrity guarantees lack rigor.”

Tokenomics of IOTA

As of May 27, 2020, IOTA was trading at $0. 195231, at a market position of #24 and with a market cap of $542, 649, 121. The coin had a 24-hour volume of $14,089, 509. IOTA’s circulating supply is 2, 779, 530, 283, with a total and maximum supply of the same value. The currency’s all-time high was $5.69 (December 19, 2017), while its all-time high was $0.079620 (March 13, 2020). 


The IOTA project takes the progressive idea of IoT and proposes to make it even better with distributed ledger solutions. For now, the project is far from perfect, or even near full-blown implementation. If everything goes as planned, IOTA will be an unstoppable idea, not just in the distributed ledger space, but in the world.