With the growth of cryptocurrencies, there have come other sophisticated tools that are being used to ensure that transactions become more untraceable, which means that third parties seeking to track movements of funds will find it complicated.
In the end, law enforcement agencies and in particular the U.S. Secret Service (USSS) understand the repercussions and are looking for ways to tackle the ever-rising threats.
The severity of the matter cannot be left ignored as sometime in mid-June, top officials from the Secret Service requested for the assistance of U.S.
Congress to minimize the usage of cryptocurrencies such as Zcash and Monero, which are popular among those undertaking various forms of illegal activities.
How Congress can be of help the Secret Service
On June 20, USSS Office of Investigations Deputy Assistant Director Robert Novy submitted a prepared testimony detailing the USSS' response to cryptocurrency-related crime to the House of Representatives Committee on Financial Services and Subcommittee on Terrorism and Illicit Finance.
In the testimony, Novy said that the cryptocurrencies with enhanced anonymity features come with more challenges.
Therefore, there is the need for the House to consider the adoption of appropriate legislative measures that will help law enforcement agencies combat crime connected to cryptocurrencies.
Why USSS Is Calling for the Intervention of Congress
Novy stated in the testimony that not only do cryptocurrencies undermine financial systems, they also aid money laundering schemes and help facilitate fraud.
However, and despite this, they have been able to outsmart some criminals in their undertakings by tracing some transactions back to them.
Another fact is that criminals are increasingly making use of tumbling services which enable them to clear traces of how their coins have moved.
The result is that it makes it difficult for third parties, and law enforcement agencies in particular, to trace the transactions.
Because of this, Novy is also seeking for the strict regulation of mixing services and mining pools which gives fugitives a haven.
What Other Officials Had to Say
The sentiments by Novy were also echoed by Greg Nevano of the U.S. Immigration and Customs Enforcement.
Nevano, who is the deputy assistant director of ICE's Illicit Trade, Travel and Finance department, says that the newer cryptocurrencies, which came years after Bitcoin and Ethereum, have increased anonymity because of enhanced security features in their Blockchain.
Since the wave is slowly changing after individuals realized that older cryptocurrencies were insecure and that it was possible to trace them, the new cryptocurrencies have gained preference which has, in turn, increased their demand.
Nevano added that unregistered P2P platforms that place adverts on platforms like Craigslist have poor rules because individuals can use them for illegitimate purposes, and it is for this reason that his agency will focus on them.
What's more is that they have realized that such avenues are charging their clients an additional cost to make them preserve any information that may compromise their safety.
The Immigration and Customs Enforcement official also said that as of April 2018, his agency had coordinated various operations that led to the confiscation of over $25 million in cryptocurrencies.
With the current improvement in technology and lack of proper regulations, cryptocurrencies have successfully aided various sorts of criminal activities within and outside the U.S., and according to a recent report by cybersecurity firm Group-IB, the U.S. is responsible for more than half of the world's crypto-related crimes.
The magnitude of the situation is on an ascending path that during the hearing, even North Carolina House Representative Robert Pittenger said that the illegitimate use of digital currencies is among the top emerging threats to the country's national security.
Then, the associate director of the Financial Crimes Enforcement Network (FinCEN) enforcement division, Thomas Ott, said in a testimony that in his role he has witnessed various forms of cryptocurrencies responsible for billions of dollars worth of illegal activities.
These activities include ransomware attacks, hacks on cryptocurrency exchanges and last but not least, the transactions of the coins in darknet markets since 2011.
What is notable to Ott is that the use of virtual cash finances a majority of illegal activities.
In the hearing, he further said that given the associated risks of cryptocurrencies, then something ought to be done before the matter gets out of hand.
Ott also pointed out that nations such as Australia, South Korea and Japan have taken legislative measures to address the cryptocurrency challenges and further suggested that the U.S. could do the same so long as jurisdictions operate under the same international laws.
Some of the Measures Taken by the USSS
Novy also said in his statement that he and his agency are committed to using innovation and strategy to stay up-to-date with the latest tactics used by cybercriminals.
So far, he says that his experience in the field has enabled him to gain the requisite knowledge and understanding of various concepts that have helped him table the findings.
Apart from that, the Secret Service, which has separate divisions involved in VIP protection as well as fighting financial crime, has been working hand-in-hand with other federal agencies to combat the different forms of criminal activities that happen by the use of cryptocurrencies.
He retaliates that the same will continue happening for as long as they have to do so.
Crypto Crime Turning into a Global Problem
The fact that blockchain technology is shaping the future of financial transactions remains undisputed, and we continue seeing many countries adopting its use at different rates.
In the meeting with the Congress representatives, it was highlighted that the increased use of digital tokens also increases the challenges faced by security personnel in combating related crimes, and hence the need for global cooperation.
By establishing a Financial Action Task Force, then it becomes more efficient for FinCEN to coordinate certain high-level operations that involve cryptocurrency-facilitated crimes in different regions.
It is common for officials operating in different security agencies from different countries to come together when there is a unity of purpose, and the same is the case when virtual currencies and the dark web are involved.
On several occasions in the past, internationally coordinated law enforcement operations have brought down major darknet markets.
The other issue with virtual currencies, since they lack standard regulation unlike banks and other financial institutions, criminals can navigate through multiple options in different regions until they find an exchange with favourable terms.
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