Ban Cryptocurrency to Fight Ransomware
By Lee Reiners, 5/25/21, Wall St. Journal

No one is out of reach from ransomware attacks. The Colonial
Pipeline hack made that clear, along with the nearly 2,500
cases of ransomware—a form of malware that encrypts computer
files and holds them for ransom—reported to the FBI last year,
a 66% annual increase. In 2020 ransomware victims paid hackers
$350 million in cryptocurrency. Since many victims pay ransom
without reporting the incident, these numbers understate the
damage.

The solutions floated after the Colonial hack—improved cyber-
security in the private sector & public-private collaboration
to protect critical infrastructure—are pro forma & inadequate.
There's a simpler & more effective way to stop the ransomware
pandemic: Ban cryptocurrency.

Ransomware can’t succeed without cryptocurrency. The pseudo-
nymity that crypto provides has made it the exclusive method
of payment for hackers. It makes their job relatively safe &
easy. There is even a new business model in which developers
sell or lease ransomware, empowering malicious actors who
aren’t tech-savvy themselves to receive payment quickly &
securely. Before cryptocurrency, attackers had to set up
shell companies to receive credit-card payments or request
ransom payment in prepaid cash cards, leaving a trail in
either case. It is no coincidence that ransomware attacks
exploded with the emergence of cryptocurrency.

Banning anything runs counter to the American ethos, but as
our experience with social media should teach us, the
innovative isn’t always an unalloyed good. A sober assessment
of cryptocurrency must conclude that the damage wrought by
crypto-fueled ransomware vastly outweighs any benefits from

cryptocurrency.

It isn’t obvious that cryptocurrency provides any benefit at
all beyond the chance to make a quick buck. I have been
studying the crypto market since its inception, & I have yet
to identify a single task or process that crypto makes easier,
better, cheaper or faster. Don’t take my word for it. Ask
any friend why he owns cryptocurrency, & the answer will
invariably be “to make money.” In other words, speculation.
(The blockchain tech that underpins crypto does have promising
apps in supply-chain management & other areas.)

Because I point this out, crypto enthusiasts call me a
Luddite, statist, technophobe or worse. Asset bubbles are
maintained by a common narrative, & anyone who dares question
it must be attacked. But a growing chorus is pointing out
the emperor has no clothes.

A day after the Colonial Pipeline shutdown, cryptocurrency
champion & self-proclaimed “Dogefather” Elon Musk went on
“Saturday Night Live” & admitted the obvious: The dogecoin

cryptocurrency is a “hustle.” He then performed an encore by
tweeting that Tesla was suspending the use of bitcoin for
vehicle purchases due to the coin’s carbon footprint. The
computer “mining” & transfer of bitcoin requires a great deal
of energy, much of which comes from burning fossil fuels.
In response, the narrative has now expanded to include the
absurd premise that crypto encourages the development of
sustainable energy.

Aside from Libra, Facebook’s initial ill-fated foray into

cryptocurrency, the topic has drawn limited interest on
Capitol Hill. There is a Congressional Blockchain Caucus with
around 30 members, but it says it has “decided on a hands-
off regulatory approach, believing that this tech will best
evolve the same way the internet did; on its own.” The issue
hasn’t been tarred by the brush of partisan politics, but
the crypto industry is hurriedly following the well-trod
path to K Street lobbying.

Lawmakers should get serious. The Colonial Pipeline incident
disrupted the East Coast’s gas supply. The next attack could
be deadly. Imagine one that shuts down the power grid during
a heat wave or taints a municipal water supply.

Any solution must at least reduce the use of cryptocurrency. Govts &

retailers should be encouraged not to accept payment
in it. An outright ban could get the job done, but if it
would be too difficult to enforce or get through Congress,
regulators could crack down on the off-ramps and on-ramps,
the points at which crypto is converted into fiat currency
and vice versa.

Cryptocurrency firms serving U.S. customers are supposed to
be subject to the same anti-money-laundering requirements
as traditional financial institutions, but more can be done.
Late last year, the Treasury Dept’s Financial Crimes Enforce-
ment Network proposed a rule to establish new reporting,
verification & record-keeping requirements for certain crypto-
currency transactions. Last week Treasury proposed granting
more resources to the IRS to address crypto & called on
businesses to report receipts of more than $10,000 in crypto-
currency. Both proposals should be adopted, but they will be
effective only if other countries follow suit.

So long as there are crypto exchanges abroad with lax money-
laundering controls, cryptocurrency will maintain its appeal
to hackers. Bloomberg reported May 13 that money-laundering
& tax officials at the Justice Dept & IRS are investigating
the world’s biggest crypto exchange, Binance Holdings, which
is incorporated in the Cayman Islands & has an office in
Singapore.

Like climate change, cryptocurrency presents a classic
collective-action problem. Some policy makers recognize the
dangers but are hesitant to act for fear of driving crypto
companies overseas without doing much to solve the problem.
Diplomacy may bear fruit in the long run, but meanwhile Biden
should sign an executive order requiring the Treasury sec'y,
in coordination with all fed financial regulatory agencies
& the IRS, to develop a more coherent regulatory framework
for cryptocurrency and identify steps each agency can take
to counteract its use in financing terrorism & facilitating
ransomware attacks.

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.

Mr. Reiners is executive director of the Global Financial
Markets Center at Duke Law.

https://www.wsj.com/articles/ban-cryptocurrency-to-fight-ransomware-11621962831