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November 28, 2022

Equity.Guru

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Biden administration’s sanctions of Suex exchange may win one battle, but the war continues

There’s been a technological cold war going on under our noses and most of us aren’t even aware of it.

 

Until now we’ve been at the mercy of hackers. These aren’t exactly disaffected teenagers running scripts from their mom’s basements anymore either, but bad-actors educated and paid for by governments with interests that run counter to ours. They might be working on behalf of their government, and they might not. It’s been suggested that war isn’t just the province of air, sea and earth anymore, but extends to include virtual realms like cyberspace, where state secrets and your banking information live. One thing is for certain: the future of warfare will be virtual.

 

The Biden https://e4njohordzs.exactdn.com/wp-content/uploads/2021/10/tnw8sVO3j-2.pngistration fired a shot today in placing sanctions on the cryptocurrency exchange, Suex, today for being the offloading platform for at least eight different ransomware schemes. The U.S government did the work and uncovered that 40% of Suex’s transactions were associated with illegal activities, including scams.

“Today’s actions include the Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) designation of SUEX OTC, S.R.O. (SUEX), a virtual currency exchange, for its part in facilitating financial transactions for ransomware actors,” the Treasury Department said in a press release. “This action is the first sanctions designation against a virtual currency exchange and was executed with assistance from the Federal Bureau of Investigation.”

Suex is a Russian-based cryptocurrency exchange and as a result of the designation, which plants Suex squarely in a category shred by suspected terrorists and drug traffickers, the exchange is off-limits to residents and citizens of the United States with the penalty being fines or prison.  It sends a clear message to cryptocurrency exchanges around the world about the consequences of acting as witting or unwitting facilitators or beneficiaries of ransomware hacks.

What is ransomware?

Ransomware is a type of virus that invades a system and either promises to disseminate private and sensitive information, or threatens to lock it off completely, unless a condition is met.  Usually payment in Bitcoin. In 2020, the Universal Health Services, a hospital and health care network dealing with more than 400 facilities across the United States, Puerto Rico and the United Kingdom, suffered a ransomware attack that took down its digital networks at locations throughout the United States. Patients had to be rerouted to other emergency rooms and facilities and appointments and test results were delayed.

 

Attacks have ramped up in the past couple of years, surpassing more than $400 million in payments last year—which was four times the amount in 2019.

“As cyber criminals use increasingly sophisticated methods and technology, we are committed to using the full range of measures, to include sanctions and regulatory tools, to disrupt, deter, and prevent ransomware attacks,” Janet Yellen said in a statement.

There’s a deeper problem here, though.

 

Generally, the idea is that while blockchains themselves are decentralized and untouchable by government bodies, their off-boarding and on-boarding ramps—namely exchanges and wallets—aren’t. As such, they’re the next theater of war.  This skews off into two different ideological directions:

 

  1. Either you trust your government to do the right thing by you and yours, and protect you against the depredations of all threats, both foreign and domestic, or;
  2. You don’t.

The only measure governments have to curtailing or regulating activities on the blockchain is by controlling the actions and activities of these exchanges. It’s true that the average person needs not only protection from government overreach, but also from bad actors either inside or outside of his community, who may try to defraud him. It’s also true that the government you vote for, pay taxes too, does not always have your best interests at heart and having a technology like blockchain that’s otherwise free of government control could be in our best interests.

 

This isn’t a black and white issue, but instead should be taken case by case. Both come with compromises. For my buck, the https://e4njohordzs.exactdn.com/wp-content/uploads/2021/10/tnw8sVO3j-2.pngistration did the right thing here.  But the war is far from over.

But will it really matter?

No. It won’t. There’s too much money to be made. Now that one angle of attack has been covered, the world’s hackers will shift gears and come from a different direction.  They’ll fight an asymmetrical war.

 

Suex is a centralized exchange with a physical location. It’s listed as a legal entity with Russia and the Czech-Republic. You can even find it online. It may be the last of its kind in that way. Above-board exchanges like Coinbase (COIN.Q), Gemini Investments, BIGG Digital Assets (BIGG.C) subsidiary Netcoins, are going to take the brunt of regulatory retaliations due to actors that governments won’t be able to reach in the future. There will be a wide gulf between legitimate cryptocurrency exchanges and the illegal variety—much wider than there already is. The only difference today being increased and improved know-your-customer and anti-money-laundering regulations for legit exchanges, or those looking to go legit.

 

And yes, when I talk about exchanges that governments can’t reach, I mean decentralized finance. Again I’m not talking about big name decentralized exchanges (DEX) like Uniswap or Sushiswap, but smaller DEX’s that nobody knows about constructed and funded and used by scammers for scammers.

If you’re looking for a working definition of DeFi, it’s decentralized organizations that offer things like bank accounts, loans, lending, chequing accounts and other quotidian financial instruments, fed from privately funded liquidity pools and given out with no middleman or credit check required.  It carries with it a heavy amount of risk, but comes with more autonomy.  The tagline for many DeFi offerings is:  be your own bank, and it’s not inaccurate.

 

If it fulfills its promise, it could be a positive and disruptive alternative to traditional finance, which DeFi adherents call TradFi. But it comes with its own issues, such as what if the price of your autonomy comes on the backs of other people?

—Joseph Morton

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