The cybersecurity side of cryptocurrency – CSO Online

The threats are pervasive. The need for action is clear. CEOs and board members must manage cybersecurity risks through proactive engagement.

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In 2014, hackers stole about $350 million in bitcoins from Tokyo's Mt.Goxexchange. More recently, attackers successfully moved about $60 millionworth of the virtual currency ether from the DAO, or Decentralized Autonomous Organization, to an account controlled by an unknown individual or group. Although most - but not all- of the funds taken in that theft were later recovered, it was another reminder that cybercriminals are targeting cryptocurrencies.

Cryptocurrencies, such as bitcoins and other digital alternatives,have been hailedas representing the future of money and global finance.Bitcoin, the first cryptocurrency,was createdin 2009. Nowadays,hundreds of typesof cryptocurrencies are in use, often referred to asaltcoins(an abbreviation of bitcoin alternative.) New altcoinsgetlaunched every day.

Theresreason for the excitement.The technology lets people and institutions shift funds instantly and without the need fora middleman.Unlike paper currencies controlled by governments, cryptocurrencies arefully decentralizedandoperate independently of central banks. The digital assets work as amedium of exchangeusing principles of cryptography to secure transactions.

These various digital currencies have soared in popularity with amarket capitalizationnow estimated to bearound$13billion.

Butwith regulators and governments still trying to figure out appropriate legal structures and business norms governing cryptocurrencies, cybercriminalsare finding clever waysto exploit that window of opportunity.

Regulators still a step behind the technology

A study funded by the Department of Homeland Security found thatabout33 percentofbitcoin tradingplatformshave been hacked.Whats more, cryptocurrencies now frequently feature as preferred forms of exchange in ransomware attacks.

In late 2015, a U.K. phone and broadband provider calledTalkTalkreceived a ransom demand for 80,000 in bitcoin. Around the same time, three Greek banks werethreatened with dire consequences by an entity calling itself the Armada Collective unless they paid hundreds of thousands of Euros,also in bitcoin. More recently,a number of hospitals in the U.S., such as Hollywood Presbyterian Medical Center, have been attacked by hackers who demanded their victims pay ransom, also in digital currencies. The common thread in these and other ransomware incidents: attackers can easily mask theirtrue identitieson cryptocurrency exchanges where they then convert their profits back into traditional currencies.

As cryptocurrencies become more widespread,theresconcern that criminal actors will try to use them to camouflage their illicit activities in other arenas,particularly when it comes tolaundering funds.In late 2015, for instance, Dutch policearrested six peopleon suspicion ofbitcoin-related money laundering.Andearly last year, they arrested another 10 people in connection with a suspectedglobal bitcoin laundering schemevalued at $22 million.

Itspart of a trend thatlaw enforcement agenciesexpect will gather momentum in the new year.Andgiven the lack of independent oversight, criminals already have a head start.

However, none of this is likely enough to derail the popularity of cryptocurrencies. Every new technology suffers through growing pains on its way tobeing acceptedby the mainstream.Theresno reason to believe that cryptocurrencies will be any different.

Charles Cooper has covered technology and business for the past three decades. All opinions expressed are his own. AT&T has sponsored this blog post.

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The cybersecurity side of cryptocurrency - CSO Online