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One of the world's leading cybercrime investigators is urging governments to trace cryptocurrency regulations following a series of abductions in which gangs have demanded ransom in Bitcoin or criminal "private money".
David Carlisle, a well-known cryptocurrency intelligence agent, says the kidnapped gangs specifically target countries with little or no jurisdiction over Bitcoin and the hundreds of smaller "altcoins".
In an article by Rivet Coin for the Daily Express, Carlisle explained how cryptocurrency was making some types of crime easy for criminals.
Only recently, two high-profile abductions have seen gangs attempting to extort over 8 million pounds from high-profile victims' families.
In Costa Rica, the owner of the 5-day betting site – William Sean Creighton Kopko – was kidnapped at the end of last year before a gang demanded almost a million dollars worth of bitcoins.
Kopko's family eventually paid the ransom, but Kopko himself is still missing, despite 12 people being arrested for their alleged involvement in the kidnapping.
Requests in Monero
Meanwhile, in Norway, Billionaire's wife Tom Hagen is currently still in the hands of kidnappers demanding € 9 million in Monero private currency.
Anne-Elisabeth Falkevik Hagen was abducted from the family home on the outskirts of Oslo on October 31st. The Norwegian police had controlled the accident until a few days ago in the hope that new evidence would come to light.
However, the police commander who led the investigation decided to make it public, revealing that he had urged the family not to pay.
"There have been requests for redemptions and serious threats," said inspector Tommy Broske.
"The police have so far advised the family not to meet the requirements".
Both kidnappings led David Carlisle – a former US Treasury adviser on terrorist financing, financial crime and encryption activities – to pressure governments around the world to quickly introduce regulation.
Activate crime
"Cryptocurrency enables certain types of crime effectively and others less," he said.
"One of the things about extortion with cryptocurrency that's convenient for kidnappers is that all they have to do is create a digital wallet.
"We need to create an environment of hostility towards the criminal elements".
David Carlisle of Ellittico
While many countries are adopting cryptocurrency regulation and drafting policies that will facilitate more authoritarian control over portfolios, exchanges and even taxes, there are many nations that actively ignore these issues.
This, says Carlisle – currently Head of Community at the Elliptic Cryptocurrency Intelligence Agency – is leaving the door wide open to crime.
"I think one of the most significant problems we are seeing is that criminals try to exploit those parts of the world that do not regulate cryptocurrency," he explained.
"We see that criminals use services in jurisdictions where they can operate without any observation.
"There is a tangible advantage for regulation if it can promote transparency and create a level playing field with which everyone can operate safely".
Pay the ransom
In contrast to the opinion of the Norwegian police, however, Carlisle suggests that the way to trap the kidnappers of Anne-Elisabeth Falkevik Hagen would be to allow the passage of the ransom transaction. He says that the request by the Monero's controversial money-laundering currency band could be the key to their downfall.
"One of the problems we encounter is that criminals have to exchange their Monero for Bitcoin before changing them back to fiat (standard currency)," he added.
"The point where they convert Monero into Bitcoin is where we start to see the paperwork for our investigations – that's how we can track down the bad guys."
However, Carlisle suggests, there is no need to lose confidence in the progress of cryptocurrency and the benefits it can bring.
"There's a perception – even among governments around the world – that cryptography is largely criminal," he added.
"But there are many ways in which the image is changing.
"Whatever their last future, cryptocurrencies are here to stay somehow.
Shed light
"We are trying to shed light on the criminal element, but also to promote good practices in the sector.There are many actors in the industry who want to do things with the book, but there are bad actors".
Monero intervened for special criticism from Elliptic, although Mr. Carlisle said it was unusual to see the controversial private currency being used in a ransom note.
"In reality it was the case in general that we did not see Monero used in many of these kidnapping cases because it may actually be a rather difficult currency to get," he said.
"But from regulators all over the world we have heard about what these privacy coins mean to them.
"Places like Japan, for example, are talking about banning private currencies entirely because of the way they offer too many solutions to criminals."
To clean
However, he has confidence in the prospect that the crypto community can cleanse his act and believes that things are moving in the right direction.
"Where it occurs, it is inevitable that people associate cryptocurrency with crime," he added.
"However, there is a lot of evidence to show that criminal activity is shrinking in the cryptocurrency space.
"It's a huge challenge for regulators and order forces because technology and processes are constantly changing, but with the prospect of a potential global regulatory framework, this space will become more acceptable and accessible."
