By concealing identities, cryptocurrencies fuel cybercrime

When hackers hold their victims’ data for ransom, as happened in the WannaCry and NotPetya ransomware attacks that spread across the globe in mid-2017, a key to the criminals’ success is getting away with the money. That often means they use cryptocurrencies like bitcoin to collect payment, hoping to remain hidden behind a digital mask.

The WannaCry hackers went a step farther, though. They converted their bitcoins into Monero, another e-currency designed to offer even stronger privacy.

At the Initiative for Cryptocurrencies and Contracts, we have explored the ways cryptocurrency systems protect users’ anonymity. Anonymity in cryptocurrencies is fueling crime by enabling criminals to evade identification by law enforcement. We believe that this problem will get worse as cryptocurrencies evolve stronger privacy protections and become more flexibly programmable. We also believe there’s no simple solution.

Masking criminal identities

All cryptocurrency systems work in roughly the same way. Groups of computers receive transaction information directly from users who want to send each other money. The computers order and permanently record these transactions in a public ledger so that anyone can read them. The public ledger also makes it possible to keep track of how much currency individual users own. Developers tweak the code in different cryptocurrency systems to add additional features, like fast transaction processing or improved anonymity.
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