The European Cybercrime Center has published a report. On almost 100 pages, it informs decision-makers from politics about current developments in cybercrime, its risks for society and possible ways of dealing with new threats. It goes without saying that Bitcoin plays a role in this. According to the report, cryptocurrencies are not yet very widespread among criminals – but they are already presenting the criminal authorities with a variety of challenges.

Society is becoming more and more digital, so it is no wonder that crime is also becoming more and more digital. In itself, this is to be welcomed, as the violence factor disappears from crimes. However, cyber crime spills over into the living room with the DSL line, which means that we are faced with the unpleasant situation that any place can become a crime scene, while the perpetrators can be anywhere in the world. For the criminal authorities, this is likely to be the biggest paradigm shift in centuries – and a challenge that has not yet been mastered.

The report “THE INTERNET ORGANIZED CRIME THREAT ASSESSMENT (iOCTA) 2014” is dedicated to 92 pages of the Europol challenge posed by digital crime. It’s about crime-as-a-service, malware, payment fraud, child pornography, hacking and all the other crimes that take place not only through the internet, but above all on the internet.Cryptocurrencies such as Bitcoin play a subordinate role in all of these areas, but are perceived by Europol as a danger with great potential.

Why have cyber criminals not yet completely shifted their activities to cryptocurrencies?

 According to the report, the end of every cyber crime is to successfully smuggle the looted money into the legal economic cycle, in other words, in short, to launder it. Smuggling cash is still a popular method despite all the adversities, but the use of bank accounts with fake IDs, prepaid cards, transfers through Western Union, Moneygram, Ukash, Paysafecards, Paypal, Paymer, Hawala or – thing-thing – virtual currencies, show that cyber criminals are exploiting every loophole in the systems.

Virtual currencies, which offer a level of anonymity similar to that of cash, have emerged as a tool for financial cybercrime, according to the report. Among the virtual currencies, Europol includes central currencies such as WebMoney or PerfectMoney as well as decentralized currencies such as Bitcoin or Darkcoin. “Although they were generally made to be used legitimately, virtual currencies are often misused by cyber criminals.” However, due to the more stable prices, they preferred central systems such as WebMoney. Voucher systems such as Ukash or Paysafecards are equally popular. Although decentralized virtual currencies such as Bitcoin have historically not been popular with criminals, they have become the currency of choice when traditional crimes are outsourced to the Internet, such as drug trafficking on Silk Road.

 {{1} } The closure of E-Gold in 2009 and LibertyReserve in 2013 have resulted in cyber criminals increasingly distrusting central systems. Bitcoin is therefore beginning to play an increasingly important role in police investigations, for example in cases of extortionate software or other ransom demands. “One characteristic of cryptocurrencies that makes them attractive to cyber criminals is their distributive nature. This makes them resistant to government control and prosecution by criminal investigators – a promise that lies at the heart of the philosophy behind cryptocurrencies.“So why, the report asks, have cybercriminals not yet fully shifted their operations to these systems?

For one thing, the transparency of these systems is probably a deterrent, as they leave a trail of money on them Investigators may be able to schedule. In addition, the market with its fluctuating prices is very volatile, and ultimately the bankruptcy of several stock exchanges has shaken the confidence of criminals.

The potential to become a perfect means of money laundering 

Despite everything, the report sees the potential in virtual currencies to become a perfect means of money laundering. Exchange exchanges for this purpose are indeed a niche in the underground business, but legitimate exchanges with weak money laundering regulations and many withdrawal options are also abused. By generating new wallets and using privatization tools such as mixers or online casinos, the trace of the money can be concealed relatively well. Interesting reviews and guides on the subject of bitcoin can be read here and what is interesting is that this is a cool expert.

So it is a threat that is currently still manageable , but can be of enormous importance in the future. The report therefore provides some advice for investigators and law enforcement agencies: Within the limits of national laws, they should promote ways of generating evidence from virtual schemas, as they do with other financial institutions. You should develop the ability to freeze and confiscate accounts and funds.

The report describes the challenges that this brings with cryptocurrencies: Without a central point that can provide information about suspects, the determination of the addresses in the blockchain has only limited value. However, it may be possible to use the trace of the transactions to find contacts in the real world such as exchanges, online casinos or dealers who can link an address to the owner. Another big problem is that there is no way to confiscate, freeze or otherwise block the suspect’s assets.

 “Virtual currencies represent an example of how technology is overtaking legislation . “The different definitions of virtual currencies by the European states represented a further obstacle to the investigation.” The freezing and confiscating of the assets of criminals is an integral part of many investigations, but the combination of uncertain cryptocurrencies and inadequate laws causes problems. For criminals, cryptocurrencies could become the offshore accounts of the future. “

” As a result, it is a considerable challenge for investigators to track such transactions or even to identify money laundering activities. We believe everyone should be concerned that the latest cyber currencies are designed to be completely anonymous and allow anonymous transactions. 

How to react to this challenge 

The report recommends some measures to preventively curb the coming danger of money laundering through cryptocurrencies:

  • the states should cooperate more closely to introduce measures against money laundering and implement
  • the existing money laundering regulations should be adapted to virtual currencies at EU-wide level
  • Companies that deal with virtual currencies should fall into the same categories as their non-virtual counterparts
  • Investigators should deal with virtual currencies and learn to use them to identify the accounts of suspects
  • Criminal authorities should establish and maintain relationships with exchanges for and sales outlets of virtual currencies

In summary, the Europol report Quite right when he thinks that one should react to the changed rules of the game through crypto currencies at an EU-wide level. These are just there and it doesn’t look like they’re going to leave again. It is to be welcomed that the report recognizes the legitimate potential of cryptocurrencies in some places and does not propose a ban at all. However, of course, the report represents only one opinion – that of Europol. As a report by a committee on the digital transformation of the French economy shows, one can also think very differently about the anonymity of cryptocurrencies.