Hacker News Reader

Comment by ericmay | Hacker News Reader

> Is it a way for North Korea to get paid when extorting Western companies? In fact yes, this use case does seem to work.

The "criminals use Bitcoin" while true is the weakest of the arguments against the current or future success of Bitcoin. Criminals still primarily use regular ole' fiat currency for this stuff, or have more sophisticated schemes like selling artwork. In the case of North Korea they'd have to either mine Bitcoin, or they'd have to convert their currency to Bitcoin. But who would sell to take worthless North Korean money? Unless you mean they convert dollars... in which case they were just using the dollars already.

View on HN

>> Is it a way for North Korea to get paid when extorting Western companies? In fact yes, this use case does seem to work.

> The "criminals use Bitcoin" while true is the weakest of the arguments against the current or future success of Bitcoin. Criminals still primarily use regular ole' fiat currency for this stuff, or have more sophisticated schemes like selling artwork.

Cryptocurrency enables criminal schemes that are totally impractical with cash, such as ransomware malware at scale (have you heard of it?). These schemes are an appealing use for cryptocurrency. Legitimate transactions can use conventional payment networks, but these can't and need a lawless transnational payment network like cryptocurrency provides.

Also, LOL at the idea that criminals are so busy selling artwork that they have no use for cryptocurrency.

> In the case of North Korea they'd have to either mine Bitcoin, or they'd have to convert their currency to Bitcoin. But who would sell to take worthless North Korean money? Unless you mean they convert dollars... in which case they were just using the dollars already.

LOL, I don't think you understand what you're trying to debunk at all. The North Korean state wants foreign hard currency, and cryptocurrency is a mechanism for them to acquire that (e.g. through the aforementioned ransomware).

> Cryptocurrency enables criminal schemes that are totally impractical with cash, such as ransomware malware at scale. These schemes are an appealing use for cryptocurrency, because they require a lawless transnational payment network. Legitimate transactions can use conventional payment networks.

Following that line of reasoning, a briefcase full of cash on an airplane to Colombia enabled criminal schemes that were totally impractical. Having a transnational payment network itself enables schemes. So does not having the government track and verify each and every one of your transactions.

If you wanted to make a good argument here, you'd actually focus on tradeoffs and cost-benefit for Bitcoin. Is "North Korean ransomware" an acceptable tradeoff to have Bitcoin? Idk. But the prevailing "criminals will do bad things" argument is asinine because criminals did bad stuff before Bitcoin/Cryptocurrency too, and they still mostly use fiat currency for "bad things" right now anyway. The fact that North Korea has to convert Bitcoin into dollars that ostensibly they're not allowed to have just proves the point.

The point that I was making was that cryptocurrency has significant criminal use-cases (which the GGP was playing down or was ignorant of).

While cash can be useful for criminal schemes, it's old and has significant legitimate use due to legacy momentum. Cryptocurrency, on the other hand, is new and post-dates regulated payment networks that efficiently handle nearly all legitimate payments, so it suffers from similar problems to unmoderated internet forums: it actively attracts a disproportionate share of bad actors. I'm not saying that cryptocurrency should be banned for that reason, but it's an important fact to note when it's being denied.

IMHO, cryptocurrency isn't the "future of money," because there are no practical reasons for anyone to use it as money. The main reasons people actually use it are (in order): for speculation, criminal activity, or (often questionable) ideological reasons. The latter is a drop in the bucket compared to the first two.

Large amounts of fiat currency are heavy, bulky, and difficult to smuggle. The US got rid of $500 and $1K notes because they proved more useful for doing crimes than for doing business, and the same happened with bearer bonds.

Criminals will do bad things at scale with cryptocurrency. Ransomware existed before bitcoin, but the amounts demanded were pittances compared to what can be demanded today because the difficulty of using cash or the banking system for a transaction increases exponentially as the amounts involved increase.

Wire transfers exist. Paypal scams, etc. I'm just not convinced anything is fundamentally different here. It's a weak criticism. There are much better ones, and even this criticism is better served by arguing about tradeoffs and benefits instead of trying to find some way to express that Bitcoin is categorically different.

It's hard to move cash, but it was harder to move gold ergo we should stop using cash because it's easy for criminals to move and use gold instead. That's the line of reasoning at play here that is espoused by this argument.

Cryptocurrency is unique in that it allows pseudonymous, irreversible transactions of unbounded value. https://www.lawfareblog.com/ransomware-problem-bitcoin-probl... is a good long-form write up of the argument if you're interested, or https://www.investopedia.com/articles/bonds/08/bearer-bond.a... if you want to read about why we've prohibited financial instruments for similar reasons in the past.

Wire transfers are also hard to reverse, but banks have security ceremonies around them to prevent misuse, and good luck to you if you want to pay a $20MM ransom with an international wire transfer. Even if you were able to find a banker who wouldn't call the FBI on you, the recipients of the transfer are exposing themselves to significant risk of capture by interacting with their local banking system and by providing you with the details of their account.

Cash being convenient for small transactions and difficult to use for large ones is a deliberate feature. The point is to strike a balance between usability and vulnerability to misuse. E.g., you have to declare when you're moving more than $10K across an international border, and it's actually hard to smuggle that much cash due to the weight and bulk. Gold is also heavy and bulky, which is an important security feature of Fort Knox (even if you break in, how are you going to abscond with tons of gold bars?).

Do you have any source for your claim "Criminals still primarily use regular ole' fiat currency for this stuff"? Isn't it much easier to get paid for your ransomware in crypto and remain on chain without having to touch fiat and getting blocked by sanctions?

The illicit drug trade far exceeds the number of ransomware events and they use almost exclusively fiat.

So you don’t disagree that extortionists use crypto to monetize their illegal activity at scale.

I think they're saying that they're not mutually exclusive.

I agree, using the argument of "x is a tool for illegal activities" is brittle because you could say that about literally anything.

You could attribute the same thing to Amazon and Google gift cards being used in scams.

You can't buy a $1MM Amazon gift card. That would be incredibly useful for illegal activity but more or less useless as a gift card.

When financial instruments are primarily used for licit activity, we tend to add features that make illicit activity more difficult but accept that some illicit use will occur. That's why we still have $100 (but with serial numbers) and don't have bearer bonds any more.

>Criminals still primarily use regular ole' fiat currency for this stuff

Overall "money turnover" - idk whats the proper English term for that, basically value of all transactions over some period - is multiple orders of magnitude larger for fiat currency.

That does not change the fact that criminal activity is way, way larger % of crypto turnover.

Yep. To go further, bitcoin hasn't been the darknet currency for a good 5 years now, these days everyone is using monero.

The North Korea is thing is just rumor-mongering, or governments pointing fingers at each other as they always do. The only eastern country I've heard publicly admit to using bitcoin is Ukraine: https://www.nytimes.com/2022/03/11/technology/bitcoin-ukrain...

BTC here is synecdoche for all crypto. Silly crypto flavor of the day X doesn’t avoid the ransomware problem at all.

> Unless you mean they convert dollars... in which case they were just using the dollars already.

It's actually pretty hard to spend dollars when you represent a sanctioned entity. A DPRK official may have a suitcase full of USD, but no western bank will accept their deposit or accept a transfer from a bank or account associated with the North Korean regime. But if they can find someone who will take their USD in exchange for no-questions-asked crypto, then they get to evade sanctions (at least for a little while).

well they have to convert the bitcoin to fiat to buy stuff, for sure.

Huh? The argument is that they commit crimes and receive ransoms in BTC that they can then convert to USD, EUR. This is a new incentive to commit crimes that simply didn’t exist before; wire transfers and the like are not a good substitute, by design.

If crypto disappears today, ransoms will still be prevalent, but will be much higher as they will be more difficult to pay. It's not a new incentive at all, it just opened up the ease of payment.

Not only does that not make sense…it doesn’t make sense! Why would unpayable ransoms be higher? And my argument is that in fact, “open[ing] up the ease of payment” enables a new form of monetizing activity, so it is a new incentive because it unlocks a new business model.

I think what they're saying is if something is hard to do, you "go big or go home". If something is super easy to do, you'll accept less because you're probably hitting up a lot more people with it.

Like they might accept a ransomware of $200 instead of nothing from person X because they're hitting up thousands of people with it, whereas if you go through all the effort to physically kidnap someone and leave a ransom note, you're not going to be able to do that thousands of times, probably just a couple at most, so you're going to demand a large ransom payment to make it worth the effort, like $1 million+.

They also didn't say 'unpayable', btw, just more difficult to pay.

Yes, that's what I'm saying. Also, cost of doing business goes up because and margins go down due to ransom payments that fall through the cracks, so according to the laws of capitalism -> ransom payments go up.

Reply on news.ycombinator.com