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Hit the bit time

14 May 2021 By Gina Chon

The classic ransom is a suitcase full of unmarked U.S. dollar bills. Bitcoin’s role in the Colonial Pipeline hack shows the global currency of crime has a rival. That’s a sort of sign of bitcoin’s success, but it also sets the scene for regulators to step up their interventions.

Colonial’s predicament spotlights bitcoin’s ease of use. A week ago, the fuel transport company paid a ransom of nearly $5 million in the digital currency to regain access to its computer systems, Bloomberg reported on Thursday. In 2017, one of the biggest ransomware attacks called WannaCry demanded payment in bitcoin from more than 200,000 victims. A year later, more than half of such breaches demanded bitcoin, according to cybersecurity firm PurpleSec.

It reflects the rapid acceptance of the 12-year-old cryptocurrency. The market value of all the bitcoin in circulation, totaling almost 19 million, surpassed $1 trillion for the first time in February. It’s now trading at around $50,360, according to digital currency exchange Coinbase.

It has become more common in everyday transactions too. Last year, National Football League player Russell Okung became the first in the sport to have at least part of his salary paid in bitcoin. More home sellers are accepting cryptocurrency, particularly in countries that have weak fiat currencies like Argentina.

But the anonymity is a legitimate concern of regulators. The asset itself isn’t regulated so no personal information is needed to transfer or convert cryptocurrencies, though watchdogs are increasingly scrutinizing related digital exchanges and payments services. Banks facilitating U.S. dollar transactions have to adhere to so-called know your customer rules that require recording certain data about the parties involved.

Because cryptocurrencies aren’t bound by such measures, it’s used in nefarious schemes, financing terrorism and other illicit activity. That has led to an increase in federal investigations. For example, crypto exchange Binance is under investigation by the U.S. Justice Department and the Internal Revenue Service for possible money laundering, according to Bloomberg.

New U.S. Securities and Exchange Commission Chairman Gary Gensler has also signaled more regulations around crypto activities. Being the go-to for ransom demands shows that bitcoin has moved from the fringe into the conventional, but also gives Gensler and other watchdogs a reason to step up the pace.

 

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