On July 13, Robert Mueller's team filed an indictment of 12 Russian intelligence officers. These agents are accused of hacking the Hillary Clinton campaign, the Democratic National Committee, and the Democratic Congressional Campaign Committee during the lead-up to the 2016 election. The indictment depicts an enormous theft of documents from those organizations, an effort to damage Democrats' chances in the election, an elaborate disinformation campaign, and an international technical infrastructure paid for using cryptocurrency.
According to the indictment:
"Although the Conspirators caused transactions to be conducted in a variety of currencies, including U.S. dollars, they principally used bitcoin when purchasing servers, registering domains, and otherwise making payments in furtherance of hacking activity."
The indictment specifically states that bitcoin was used to purchase a virtual private network and to lease a server in Malaysia. The server was used to host the DC Leaks website, and the virtual private network was used to access the Guccifer 2.0 Twitter account. The conspirators are suspected of using this account to contact a US reporter with whom they shared DC Leaks website access.
The indictment doesn't say how the agents made their payments, though it does claim some of the infrastructure paid for with bitcoin was located in the United States (including a leased computer in Illinois). There is only one bitcoin transaction specifically described in the indictment. It's a small payment – worth only about $10 (bitcoin being valued at about $375 at the time.)
The indictment says investigators found an email sent from one of the Russian agents that gave instructions for the cryptographic transfer:
"On or about February 1, 2016, the gfade147 [email] account received the instruction to 'please send exactly 0.026043 bitcoin to' a certain thirty-four character bitcoin address. Shortly thereafter, a transaction matching those exact instructions was added to the Blockchain sic."
ETHNews found only one transaction for that amount on that date. It is to a bitcoin address that had no previous transactions. The entire balance associated with that address was transferred to two other addresses on the same day.
Tracing the payments back through the ledger, the funding appears to be from an account that had been making small payments since December 2015, at which time the account received payments from four other addresses.
The revelation that cryptocurrency was used by the Russian agents has led to two entirely opposite reactions – either cryptocurrency requires additional regulation or the nature of the public ledger makes cryptocurrency more traceable and, consequently, less likely to be used in criminal activity than cash.
On the increased regulation side, Representative Emanuel Cleaver (D-MO), tweeted:
Cleaver was immediately criticized for this comment. Some pointed out (inaccurately) that bitcoin's public ledger was what allowed Mueller's team to determine Russia was behind the hack, and that (perhaps more accurately) bitcoin is more traceable than cash.
Conversely, and similar to some of Cleaver's Twitter critics, an article in Forbes claimed the indictment possibly "exonerated" bitcoin, which has long suffered a reputation for being the currency of criminals. That article stated the bitcoin blockchain is:
"A highly traceable transaction registry, much more so than the U.S. dollar for example, which only triggers red flags at large transaction thresholds … The bitcoin blockchain by contrast is a public ledger and the movements of capital and their destinations, albeit in hashed digital addresses or wallets, are highly traceable, widely known and at a much lower transaction value."
In fact, nothing in the indictment indicates that records on the bitcoin ledger led Mueller's team to the suspects. Rather, an email ordering a bitcoin payment to be made led the investigative team to look at the bitcoin ledger. At best, the ledger confirmed that the requested transaction was made. However, the indictment hints that the use of cryptocurrency made the investigation relatively difficult:
"The use of bitcoin allowed the Conspirators to avoid direct relationships with traditional financial institutions, allowing them to evade greater scrutiny of their identities and sources of funds."
Criminals have always found means of funding their activities. This obviously includes the use of cash, but gold, weapons, and even cigarettes are also employed. At least in years past, diamonds were believed to be a favored means of value transfer among criminals and terrorists, due to the fact that they hold a lot of value relative to their size. They are portable and relatively untraceable, but, like cash, they have to be physically delivered to the payee. Cryptocurrencies offer a certain amount of traceability but have the clear advantage that they can easily be sent across borders.
While we don't yet have any hard evidence that cryptocurrency is used to fund criminal activity at a greater rate than other means, it's naive at best and intellectually dishonest at worst to claim that it hasn't created a new challenge for both law enforcement and national security.
It's worth noting that earlier this week, an Iranian official told the Mizan News Agency his country is considering using cryptocurrency to circumvent US sanctions, which gives some credence to Cleaver's concerns that the digital assets pose a threat to national security.