Ransomware attacks that have plagued hospitals, businesses and consumers around the world might well not happen if cryptocurrencies were not available, a senior policeman has advised MPs.
A parliamentary select committee is currently investigating cryptocurrencies, raising the prospect of some form of extra controls.
Detective Inspector Craig Hamilton, national manager of New Zealand Police’s financial crime group, said some crimes facilitated by cryptocurrency would not occur in their absence, with ransomware being a “classic” example.
“In the absence of cryptocurrency, we potentially wouldn’t have the ransomware attacks that we are experiencing around the world,” he told the committee.
* Critics and supporters of crypto-currencies clash in advice to MPs
* GCSB’s cyber arm warns foreign ‘investment’ in disinformation likely to grow
* Suspected hackers arrested in global ransomware crackdown
Hamilton gave his evidence by video link from Waikato, whose district health board is still recovering from a crippling ransomware attack in May.
Insurance broking giant Marsh McLennan has estimated 98 per cent of ransomware demands were made in bitcoin last year because it allowed cyber criminals to receive funds with “a high degree of anonymity”.
This week, the GCSB’s National Cyber Security Centre (NCSC) said criminal attacks on significant national organisations had more than doubled in the year to June, singling out ransomware as one of the key threats.
Access to cryptocurrency exchanges provided the infrastructure behind criminal ransomware activity, it said.
“A growing cyber insurance market and larger ransom payments contribute to higher revenues for ransomware actors, who reinvest their earnings to develop new malware and research new targets,” the NCSC said.
The increased use of cryptocurrencies also enabled cyber criminals to launder their proceeds of crime, often without detection,” it said.
Californian Research firm Cybersecurity Ventures estimated in June that the global cost of ransomware would spiral from US$20 billion (NZ$28.5b) this year US$256b by 2031.
Hamilton also told MPs the world would probably see more ransomware-type attacks.
One of the reasons was that regulatory oversight of crypto exchanges was “very patchy around the world,” he said.
“Although cryptocurrency can leave New Zealand with ease, it often ends up in places where it is hard to track and if an exchange … is criminally inclined, it is near impossible.
“We will see more of this sort of thing as it is the future of a lot of organised crime,” he said.
Cryptocurrencies have also attracted criticism because of the electricity involved in their “mining”, which often involves the use of huge numbers of computer servers to plough through mathematical calculations.
Britain’s Cambridge University estimated in February that bitcoin consumed 113 terawatt-hours of electricity last year, which is more than 2½ times all the electricity used in New Zealand last year.
But Thorsten Albers, Auckland-based chief innovation officer of cryptocurrency company Citibase, told the select committee that New Zealand should make “gains and profits” from cryptocurrencies tax-free, because they were hard to tax.
“That would make a lot of headlines around the world,” he told MPs.
Such a move would bring a lot of blockchain developers to the country, he said.
“New Zealand could be a crypto hub.”
The Reserve Bank told the committee in September that cryptocurrencies were rarely used as a form of payment by businesses.
But BlockchainNZ, an association of organisations and individuals involved in the Blockchain technology that underpins cryptocurrencies, told the committee that they were a source of innovation.
It has appealed to the committee and government agencies to work with the industry before imposing any new regulations, “particularly in respect of tax law, securities law, anti-money laundering and countering financing of terrorism law and financial service provider law”.
Adam Dodds, who sits on the board of a number of cryptocurrency companies, said the horse had bolted on crypto and New Zealand risked being left behind.
Benefits of crypto included the ability to pre-program rules into payments, so for example if someone died, their wealth could be automatically distributed according to their wishes, he said.
“I take on board the fact that at the moment, people are trying to figure out exactly how or why they might spend bitcoin,” Dodds said.
“But you think about the ‘metaverse’, and where that’s going. It’s all going to be digitised value and you’re not going to pull out your Visa card in the middle of a metaverse and swipe it.”
The metaverse is a broad term generally used to describe an environment in which people are able to navigate through a number of more immersive and interconnected augmented-reality applications.
“What in reality the police are trying to say at the moment, is they’re struggling operationally and technically, to keep up with the pace of change,” Dodds said.
It might not be “fair”, but organisations that wanted to protect themselves from threats such as ransomware needed to improve their security, he said.
“What needs to happen is there needs to be a focus in terms of investment for making that happen.”