Grens, president of DigitalMint, a company that helps corporate victims pay ransoms.
Monero is considered more of a privacy token and allows cyber criminals greater freedom from some of the tracking tools and mechanisms that the bitcoin blockchain offers.
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When the FBI successfully breached a crypto wallet held by the Colonial Pipeline hackers by following the money trail on bitcoin’s blockchain, it was a wake-up call for any cyber criminals who thought transacting in cryptocurrency automatically protected them from scrutiny.
One of the core tenets of bitcoin is that its public ledger, which stores all token transactions in its history, is visible to everyone. This is why more hackers are turning to coins like dash, zcash, and monero, which have additional anonymity built into them.
Monero, in particular, is increasingly the cryptocurrency of choice for the world’s top ransomware criminals.
“The more savvy criminals are using monero,” said Rick Holland, chief information security officer at Digital Shadows, a cyberthreat intelligence company.
Created in 2014
Monero was released in 2014 by a consortium of developers, many of whom chose to remain anonymous. As spelled out in its white paper, “privacy and anonymity” are the most important aspects of this digital currency.
The privacy token operates on its own blockchain, which hides virtually all transaction details. The identity of the sender and recipient, as well as the transaction amount itself, are disguised.
Because of these anonymity features, monero allows cyber criminals greater freedom from some of the tracking tools and mechanisms that the bitcoin blockchain offers.
“On the bitcoin blockchain, you can see what wallet address transacted, how many bitcoin, where it came from, where it’s going,” explained Fred Thiel, former chairman of Ultimaco, one of the largest cryptography companies in Europe, which has worked with Microsoft, Google and others on post-quantum encryption.
“With monero, [the blockchain] obfuscates the wallet address, the amount of the transactions, who the counter-party was, which is pretty much exactly what the bad actors want,” he said.
While bitcoin still dominates ransomware demands, more threat actors are starting to ask for monero, according to Marc Grens, president of DigitalMint, a company that helps corporate victims pay ransoms.
“We’ve seen REvil…give discounts or request payments in monero, just in the past couple months,” continued Holland.
Monero was also a popular choice on AlphaBay, a massive underground marketplace popular up until it was shut down in 2017.
“It’s almost like we’re seeing, at least from a cyber criminal perspective, a resurgence…in monero, because it has inherently more privacy than some of the other coins out there,” Holland said of monero’s recent rise in popularity among actors in the ransomware space.
Monero’s limitations
There are, however, a few major barriers when it comes to the mainstreaming of monero.
For one, it’s not as liquid as other cryptocurrencies — many regulated exchanges have chosen not to list it due to regulatory concerns, explained Mati Greenspan, portfolio manager and Quantum Economics founder. “It certainly isn’t enjoying as much from the recent wave of institutional investments,” he said.
In practice, that means that it’s harder for cyber criminals to get paid directly in the currency.
“If you’re a corporation and you want to acquire a bunch of monero to pay somebody, it’s very hard to do,” Thiel told CNBC.
The digital currency could also be more vulnerable to regulation at its on-and-off-ramps, which is the bridge between fiat cash and crypto tokens.
“I would wager to say the U.S. and other regulators are going to shut them [monero] down pretty hard,” said Thiel.
One way they could go about that: telling an exchange that if they list monero, they risk losing their license.
But while the U.S. government can indeed keep monero at bay by marginalizing liquidity points, Castle Island Ventures founding partner Nic Carter believes that markets which allow peer-to-peer transfers of monero to fiat will always be hard to regulate.
There’s also nothing to keep hackers within U.S. jurisdiction. Criminals could easily choose to carry out all of their transactions overseas, in places that aren’t subject to the kind of controls American regulators might put in place.
Bitcoin still rules ransomware
Cyber insurance is another reason why bitcoin is still the currency of choice for most ransomware attacks.
“Insurance is so important in this space, and insurers often refuse to reimburse a ransom payment if it’s been in monero,” said former CIA case officer Peter Marta, who now advises companies about cyber risk management as a partner with law firm Hogan Lovells.
“One of the things that insurers will always ask for is what type of due diligence the victim company conducted, before making the payment…to try to minimize the chance that the payment goes to an entity on the sanctions list,” explained Marta.
Traceability is more easily accomplished with bitcoin, given that its blockchain lays bare transaction amounts and the addresses of both the sender and recipients taking part in the exchange. There is also an established infrastructure already in place for officials to monitor these transactions.
Authorities keep lists of bitcoin wallets, which are tied to different sanctions regimes.
While monero does offer a greater degree of privacy over bitcoin, Holland points out that threat actors have mastered certain techniques to anonymize transactions in bitcoin, in order to obscure the chain of custody.
He says that cyber criminals often turn to a mixing or tumbling service, where they can combine the illicit funds with clean crypto to essentially make a new type of bitcoin, at which point, they turn to currency swaps.
“Just like you would do dollars to pounds…they may go bitcoin, to monero, then back to bitcoin, and then get a bitcoin ATM card, where they can just cash out dollars with it,” explained Holland.
So even though bitcoin’s blockchain is public, there are still ways to make it difficult for investigators to trace transactions to their ultimate destination.
