Even though Silk Road, the online underground market for drugs and criminal dealings, has long been shut down and its founder Ross Ulbricht put behind bars, the digital currency industry still seems vulnerable to illegal activity. After all, transactions done using bitcoin are anonymous, allowing criminals to transfer funds without being traced.
In addition, various forms of digital currency have been used in scams, particularly those involved in online malware or DDoS attacks that demand bitcoin as payment. This has led many to speculate that the rise of bitcoin could foster more cyber criminal activity.
Digital Currency Drawbacks
The lack of a centralized monetary authority overseeing the digital currency industry has been identified as one of the primary reasons for the prevalence of illegal usage. While some governments and states have implemented their own regulations for the companies in this kind of business, the lack of coordination and understanding still leaves most consumers at risk.
A shift to a digital currency-based system would mean that most of the world’s wealth would be stored across a network of computers, which could be hacked by organized groups of cyber criminals. Some also fear that cyber terrorists, possibly state activists in the pay of a foreign power, might simply wipe all records of a significant proportion of wealth in order to create economic chaos and a financial meltdown.
According to a report from US regulator, the Financial Stability Oversight Council, “Malicious cyber activity is likely to continue, and financial sector organisations should be prepared to mitigate the threat posed by cyber attacks that have the potential to destroy critical data and systems and impair operations.” According to Australian bank ANZ, a centralized move to accelerate all electronic payments through the banking system within the hour has serious implications for cyber security.