Crime keeps pace with rise in cryptocurrency prices - Financial Times

The rising value of cryptocurrencies is likely to push up corporate ransom and extortion demands, a UK cyber security company has warned.

Demands for at least $25m are likely to increase because technological changes in virtual currencies are making it easier for criminals to move sums anonymously, says MWR InfoSecurity.

MRW, which tests cyber defences for banks and governments, has made the risks known to several large City institutions in a report that focuses on the effects of the growing interest in trading cryptocurrencies.

The surge in demand is slowly building the depth and liquidity of the market, with prices rising for bitcoin and Ripple and Ethereum, its emerging competitors, the company argues.

The growing liquidity makes it easier for buyers and sellers of assets to conduct transactions without dramatically moving the asset’s price, and rising prices enable larger sums to change hands more easily.

In recent months bitcoin prices have soared to record levels, above $6,000, although the total market value of cryptocurrencies is just $171bn, according to Coinmarketcap.com.

“A single transaction that consumes much of the liquidity of a market is very likely to be noticed, whilst a proportionally smaller transaction on a larger marketplace will generate less attention. As such, increasing liquidity of cryptocurrencies will mean criminals can extract greater values,” the report said.

In recent years, some cyber criminals have demanded ransoms for ending their attacks on corporate websites and operations. Many ask for payment in cryptocurrencies, ownership of which is stored anonymously using blockchain ledger technology.

A poll in July for Citrix, the US software company, found that UK companies had been stockpiling bitcoins in case of attack. They were prepared to pay on average £136,000 to regain access to critical data and intellectual property, a rise of 361 per cent year-on-year, Citrix found.

Collecting real-world cash that could be spent anonymously presented problems for criminals until the summer, the report added, in part because the blockchain, the infrastructure underpinning bitcoin, sometimes took minutes or hours to finalise payments. Until then, ransomware demands were limited to about $40,000, the report argued.

But in late July bitcoin split into two currencies, and transaction payment times have been speeded up. The two versions account for about $104bn of the total market.

Earlier this year the US justice department shut down AlphaBay, the largest criminal marketplace on the internet. The agency said it used cryptocurrencies including bitcoin, Monero and Ethereum to hide the locations of its underlying servers and the identities of its administrators, moderators and users.

Jamie Dimon of JPMorgan and Larry Fink of BlackRock, two of the most powerful men on Wall Street, have predicted governments will eventually crush virtual currencies because their main value lies in being a tool for criminals.

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