The Bank of Russia, Russia’s central bank, presented broad suggestions this week to limit the country’s cryptocurrency ecosystem. Because a large component of the cybercriminal economy operates out of Russia and uses bitcoin to transfer wealth, such rules may have the unintended consequence of removing some of the comfort ransomware gangs have found in the region.
Up until last week, when Russian security services detained members of the REvil group, cybercriminals viewed Russia as a safe haven in which they could victimise overseas targets without fear of being prosecuted. That included many of the cryptocurrency exchanges used by money launderers working for those organisations who wanted to keep their monies close to hand.
Ban local exchanges as a means of promoting financial stability, national security, and consumer protection is one of the key recommendations of the Bank of Russia’s consultation document.
For criminals who use foreign exchanges as a nexus for ill-gotten profits, being forced to use them raises a number of issues. Local exchanges have a reputation for being weak on anti-money laundering regulations for cybercriminals, which prompted to US sanctions last year against one Russian exchange. For evidence and seizures, exchanges within Russian jurisdiction were subject to Russian judicial monitoring, which Russian parties have historically placed a lot of trust in. Furthermore, as Liska points out, obedient local exchanges may transfer cash to criminals directly rather than requiring a pay-out through the global banking system, which would be subject to tougher global regulation. Obtaining and transporting a package of Euros from another country may be more difficult.
The Bank of Russia’s paper does not specifically address cybercrime. Instead, it examines the possible impact of cryptocurrencies on the economies and energy security of developing countries. The Bank makes three primary recommendations: prohibiting local mining, shutting down local cryptocurrency exchanges, and making existing regulations against the use of bitcoin for direct purchases more stringent. It wouldn’t stop people from buying or owning bitcoins on overseas exchanges.
The Bank expects that by taking these steps, it would be able to keep control over a shaky emerging economy that is more prone to volatility than many of its Western counterparts. The Bank is concerned that widespread cryptocurrency investment will lower the national money supply, limiting local investment, and that market volatility may wipe away local wealth totally. It also warns that Bitcoin mining could jeopardise the country’s energy security by using more electricity than the country can generate.
However, the consequences of cybercrime could be severe. Tom Kellermann, VMware’s head of cybersecurity strategy and a member of the US Secret Service’s Cyber Investigations Advisory Board, pointed out that other methods of getting illicit payments into criminal hands, such as WebMoney, the Russian internet payment system, could see a resurgence in popularity. Nonetheless, he is upbeat about the prospective consequences.
“Some money laundering related with cybercrime in Russia will be disrupted,” he stated.
