Working Paper: NBER ID: w30834
Authors: Lin William Cong; Campbell R. Harvey; Daniel Rabetti; Zongyu Wu
Abstract: While the advent of cryptocurrencies and digital assets holds promise for improving and disrupting financial systems by offering cheap, quick, and secure transfer of value, it also opens up new payment channels for cybercrimes. A prerequisite to solving a problem is understanding the nature of the problem. Assembling a diverse set of public, proprietary, and hand-collected data, including dark web conversations in Russian, we conduct the first detailed anatomy of crypto-enabled cybercrimes and highlight relevant economic issues. Our analyses reveal that a few organized ransomware gangs dominate the space and have evolved into sophisticated corporate-like operations with physical offices, franchising, and affiliation programs. Their techniques have also become more aggressive over time, entailing multiple layers of extortion and reputation management. Blanket restrictions on cryptocurrency usage may prove ineffective in tackling crypto-enabled cybercrime and hinder innovations. Instead, blockchain transparency and digital footprints enable effective forensics for tracking, monitoring, and shutting down dominant cybercriminal organizations.
Keywords: cryptocurrency; cybercrime; ransomware; blockchain; forensics
JEL Codes: H56; K24; O30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cryptocurrency adoption (E42) | increase in cybercrimes (K24) |
| advent of cryptocurrencies (E42) | new payment channels for cybercriminals (K24) |
| professionalization of ransomware gangs (K24) | increase in complexity and frequency of attacks (K24) |
| sophisticated operations of ransomware gangs (K24) | overall landscape of cybercrime (K24) |
| blanket restrictions on cryptocurrency usage (E42) | hinder innovation (O36) |
| blanket restrictions on cryptocurrency usage (E42) | ineffective in stopping cybercrime (K24) |