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Hacking Group Darkside Pushes the US to Consider New Crypto Regulations

At the beginning of 2020 antivirus company Bitdefender announced it was “happy to announce” a big breakthrough. The company had found a flaw in the ransomware code that a hacking gang known as DarkSide was using to hack computer networks of numerous of businesses in the US and Europe. So this meant that five months before DarkSide attacked the United States Colonial pipeline, the two researchers discovered a way to fight back against the ransomware.

Panic

Then an antivirus company’s announcement alerted DarkSide.

“Special thanks to BitDefender for helping fix our issues,” DarkSide said. “This will make us even better.”

As stated by notorious hacking group: Darkside

Darkside would soon proof they were not one to bluff, unleashing a twisted plot of attacks. It then paralysed Colonial Pipeline Co. initiating a system wide shutdown of the 5,500-mile pipeline that carries 45% of the fuel used on the East Coast – quickly followed by a rise in gasoline prices, panic buying of gas across the Southeast, and closures of thousands of gas stations. Their goal: Panic – seemed to have succeeded.

DarkSide Leaks showing their thanks to BitDefender.

A Dangerous idea

Lee Reiners, executive director of the Global Financial Markets Center at Duke University’s Law School in Durham, North Carolina, believes that the most effective solution could be to completely cut off the payment systems preferred by hackers. Reiners wrote an article in The Wall Street Journal saying that;

“The solutions floated after the Colonial hack—improved cybersecurity in the private sector and public-private collaboration to protect critical infrastructure—are pro forma and inadequate,”

“There is a simpler and more effective way to stop the ransomware pandemic: Ban cryptocurrency.”

Excerpt from Reiners article in The Wall Street Journal.

According to a 2020 report from the FBI about 2.500 ransomware attacks were reported by individuals and companies. Gartner Group, a Stamford, Connecticut-based research and advisory company reported that it expects a 700%+ increase in ransomware attacks or organisations and individuals by 2025.

What many need to understand is that hackers don’t always perform attacks with the end goal being to shake down companies for their money after locking up their files or taking entire systems hostage. Many cyber attacks include the stealing of information and/or credentials to attack backup systems and the likes.

As Reiner said:

“We can live in a world with cryptocurrency or a world without ransomware, but we can’t have both. It is time for the adults to tell the children: Party’s over.”

Paying $4.4 million

Colonial CEO Joseph Blount told The Wallstreet Journal in an interview that he personally approved a $4.4 million ransom payment to Darkside in order to “release” the system. Blount told The Journal “it was the right thing to do for the country.” While many security experts and companies strongly urge never to pay a ransom because it will only encourage more attacks in the foreseeable future.

The Colonial Pipeline runs for 5,500 miles from Texas to New Jersey with various secondary lines off the main trunk. The twin tubes have a capacity of three million barrels of fuel a day (126 million gallons). The six-day shutdown of The Colonial Pipeline sparked shortages all over the region.

The United Stated Colonial Pipeline.

The Biden Administration

According to an official report the Biden administration has proposed to increase the number of IRS agents to review Bitcoin more thoroughly and is strongly urging all businesses to report any crypto transactions above $10,000. At a hearing held by the House Financial Services Committee’s Subcommittee on National Security at the beginning of 2020, investigators said they often lack the legal authority to investigate potential crypto crimes.

The bi-partisan Congressional Blockchain Caucus has introduced new bills with the goal to allow continued innovation on blockchain technologies while protecting consumers from cybercrime such as ransomware attacks. For example; there is a new bill that would authorise the Commodity Futures Trading Commission to oversee all crypto exchanges. But several states such as Wyoming and New York are already starting to push back on these proposals.

Analyst vs. Analyst

While Reiners argues that Bitcoin gives hackers such as Darkside a secure and anonymous way to collect the ransom other Bitcoin analysts say that cryptocurrencies are just a small part of a larger problem. Jason Deane, Bitcoin analyst at Quantum Economics, in London, told Newsweek that:

“All monetary networks, whether based on fiat (currency) or algorithms, have value and therefore remain attractive to criminals,”

He added the following piece of information which is probably the most important piece of info for anyone invested in cryptocurreny;

“While only between 0.5% and 2% of all Bitcoin transactions are linked to nefarious purposes, it is estimated that between 2% and 5% of all fiat currency is used in that capacity. It is not practical to ban the dollar on that basis any more than it is practical to ban Bitcoin for the same reason.”

While Reiners argues that ransomware cant succeed without cryptocurrency, Deane’s statement would make it look as if cryptocurrency is indeed only a small part of a much larger problem and it would seem very unlikely ransomware attacks would simply stop by eliminating cryptocurrencies from the equation.

Yes, in the past these kind of criminals would set up shell companies to receive payments and by using cryptocurrencies it makes it easier for them to receive these payments but recent years have shown that even cryptocurrencies and especially Bitcoin can be traced just as easily as payments through shell companies. Let’s not forget the case of DeepDotWeb.com where the owners funneled Bitcoin through shell companies and they were still traced back to them.

To Ban Or Not To Ban

An outright ban on cryptocurrency could provide a solution but that would be near impossible to enforce and would cost more money than it would save. The most likely outcome is that regulators could crack down on the off-ramps and on-ramps, the points where cryptocurrency its being bought and sold, ergo; converted to fiat currency and vice versa.

Some analysts have agreed that this tactic will most likely be the way governments will seek to control cryptocurrency on a global scale.

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