Daily Archives: February 25, 2017

Its been a volatile year so far for bitcoin. The value of the cryptocurrency jumped 20 percent in the first trading week of the year to a record high of $1,161 per virtual coin. Its value then plunged by more than a third over seven days, to $750, before climbing back up to top $1,200 on Friday.

Traders said the main cause of this roller coaster ride has been China, where the countrys central bank put domestic bitcoin exchanges on notice early last month that they needed to do more to tighten foreign exchange controls. China has been trying to curb the practice of using bitcoin to circumvent rules limiting the amount of money Chinese mainlanders can send abroad, which is currently capped at $50,000 a year.

This capital flight has caused a drop in the value of the renminbi and Chinese regulators have connected the dots between last years drop in the value of the countrys currency and a corresponding rise in the value of bitcoin. Bitcoin bought in renminbi accounted for a staggering 98 percent of all bitcoin trading activity in the last six months of 2016, according to bitcoinity.org.

Eager to convert the Chinese currency into a more stable global currency and stash that wealth abroad, many Chinese mainlanders have been buying bitcoin locally in renminbi and then, using bitcoins blockchain technology, which allows users to safely transmit bitcoin through the Internet, theyre sending bitcoin to other countries where recipients (family members, friends or other contacts) convert bitcoin back into a local currency which can then be used to make investments outside of the country.

But why isnt China simply clamping down hard on the whole bitcoin thing?

You have a government that likes to retain control, and bitcoin is a decentralized currency outside of the control of any nation-state, Christopher Burniske, blockchain products analyst at New York-based ARK Investment Management, told Salon. So that right there is a bit threatening, but at the same time China is working to be recognized as a global leader in technology and economics and the political fallout from outright banning or confiscating bitcoin is arguably too great.

Burniske said China may have other motives for not taking a hardline stance, such as working to develop its own form of digital currency, informally known as ChinaCoin. Early last year, the countrys central banksaid it was mulling a rollout of its own digital currency.

Theamount of bitcoin bought using the Chinese yuan has plummeted to less than 5 percent this week, thank to efforts by domestic exchanges to cool bitcoin trading activity with a one-month ban on making withdrawals and per-transaction fees that went into effect this month. Traders expect Chinas central bank to eventually impose regulations on local bitcoin trading, too, which helped to push the price of bitcoin down. Currently the market is unregulated in China, but traditional financial institutions are barred from dealing in bitcoin.

With so much less bitcoin trading activity from mainland China, why has the value of the currency bounced back to a record high?

Some of it has to do with traders betting the U.S. Securities and Exchange Commission will approve at least one of three proposed exchange-traded funds based on bitcoin trading before a March 11 deadline. Though its uncertain whetherU.S. regulators would actually allow trading securities based on the fluctuation in the value of bitcoin, some less cautious investors are buying bitcoin hoping the value will jump after an announcement is made. The other reason is that bitcoin has become a alternative safe-harbor investment, like gold or U.S. Treasury bonds. U.S. inflation is expected to rise this year and bitcoin is being used by some to hedge against a drop in the value of the U.S. dollar. Global political uncertainty may also be playing a role.

Whatever the case may be, bitcoins quick rebound from the China scare could be a sign that the cryptocurrency is becoming more mainstream, according to Burniske, being used more frequently to buy goods and services from merchants that accept it.

This is a sign of global traction for bitcoin, he said. You now have more bitcoin being transacted as a means of exchange than traded as astore of value. Im seeing this as a positive indication of bitcoins globally distributed support, that its not as reliant on China as many people believed it was just a few months ago.

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Bitcoin is devaluing China's currency but the country won't do much about it - Salon

U.S. corporations that have long resisted bending to the demands of computer hackers who take their networks hostage are increasingly stockpiling bitcoin, the digital currency, so that they can quickly meet ransom demands rather than lose valuable corporate data.

The companies are responding to cybersecurity experts who recently have changed their advice on how to deal with the growing problem of extortionists taking control of the computers.

"It's a moral dilemma. If you pay, you are helping the bad guys," said Paula Long, chief executive of DataGravity, a Nashua, N.H., company that helps clients secure corporate data. But, she added, "You can't go to the moral high ground and put your company at risk."

"A lot of companies are doing that as part of their incident response planning," said Chris Pogue, chief information security officer at Nuix, a company that provides information management technologies. "They are setting up bitcoin wallets."

Pogue said he believed thousands of U.S. companies had prepared strategies for dealing with hacker extortion demands, and numerous law firms have stepped in to facilitate negotiations with hackers, many of whom operate from the other side of the globe.

Symantec, a Mountain View, Calif., company that makes security and storage software, estimates that ransom demands to companies average between $10,000 and $75,000 for hackers to provide keys to decrypt frozen networks. Individuals whose computers get hit pay as little as $100 to $300 to unlock their encrypted files.

Companies that analyze cyber threats say the use of ransomware has exploded, and payments have soared. Recorded Future, a Somerville, Mass., threat intelligence firm, says ransom payments skyrocketed 4,000 percent last year, reaching $1 billion. Another firm, Kaspersky Lab, estimates that a new business is attacked with ransomware every 40 seconds.

"If you're hit by ransomware today, you have only two options: You either pay the criminals or you lose your data," said Raj Samani, chief technical officer at Intel Security for Europe, the Middle East and Africa. "We underestimated the scale of the issue."

Hackers often send out email with tainted hyperlinks to broad targets, say, an entire company. All it takes is one computer user in a company to click on the infected link to allow hackers to get a foothold in the broader network, leading to hostile encryption.

"At least one employee will click on anything," said Robert Gibbons, chief technology officer at Datto, a Connecticut company that offers digital disaster recovery services.

Law enforcement counsels U.S. businesses not to succumb to ransom demands, urging them to keep backup copies of their data in case of hostile encryption.

"The official FBI policy is that you shouldn't pay the ransom," said Leo Taddeo, chief security officer for Crypt-zone, a Waltham, Mass., company that provides network security. Until 2015, Taddeo ran the cyber division of the FBI's New York City office.

But practical considerations increasingly are dictating a different approach. "It's an option to pay the ransom to get back up and running. Sometimes it's the only option," Taddeo said.

"But it has downsides," he added. "Paying ransom just invites the next attack."

Moreover, 1 in 4 companies that pay ransoms never get their files restored, Gibbons said.

The idea of rewarding extortionists with payment makes some technologists see red.

"That makes me super mad," said Lior Div, chief executive of Cybereason, a Boston-area cybersecurity company. "There are things that are unacceptable, and we need to fight them."

Div and his company have done something about the extortion epidemic. They built a product called RansomFree that claims to detect 99 percent of all ransomware strains.

So far, the free software has been downloaded 125,000 times, the company says.

As extortionists get more sophisticated, researchers say, they are modifying their malicious code, their infection strategies and the way they collect payments.

Once they weasel their way into your network, they now take a look around.

"They'll actually explore your system to see how much money they can squeeze from you," said Andrei Barysevich, director of advanced collection at Recorded Future.

And they won't offer any sympathy, no matter how valuable the encrypted data, even if lives are at stake, say, in a health care network. They may even say they are doing nothing evil.

"They actually think they are on the moral high ground. They think the companies should have paid more for security," said Barysevich, who spoke at a presentation this week at the annual RSA cybersecurity conference in San Francisco, which bills itself as the world's leading gathering of cybersecurity specialists.

One of the reasons midsize and large companies are storing bitcoin for emergency use is that extortionists, once they succeed at penetrating a system, commonly give a deadline for payment before destroying data. But victims can't rush out and buy bitcoin in a day or two.

"It takes at times a week for (brokers) to process you," Barysevich said.

Setting up the wallet ahead of time, Pogue said, allows businesses an option that is quick, although perhaps repugnant.

"If they need to go to it, they are not spinning their wheels standing up a bitcoin wallet," Pogue said.

2017 The Star Democrat under contract with NewsEdge/Acquire Media. All rights reserved.

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Spooked by Cyber Extortion Spike, Businesses Stockpile Bitcoin - NewsFactor Network