Infosec Exec Urges US Lawmakers to Tighten Crypto Regs Over Pandemic-Driven Scams
Cryptocurrencies should be tightened, a VMWare security officer told US lawmakers, pointing to an increase in cybercrime during the pandemic.
The focus of the Tuesday hearing, which was hosted by a House Financial Services subcommittee, was on criminal activity related to financial services during the COVID-19 ban, when bad online actors target people who are unemployed or at home working out. But crypto surfaced, and lawmakers questioned witnesses about its possible uses for fraud or organized crime.
Tom Kellermann, head of cybersecurity strategy at listed software company VMWare, told lawmakers that virtual currencies need more control. The number of security breaches and thefts from digital money exchanges that cybercriminals used to launder stolen money has increased, he said.
“In addition to organized crime, it is known that extremist organizations use alternative payment systems for business purposes and collect donations. Many of these payment systems and cryptocurrencies offer real or relative anonymity. This increases the need for increased regulation of digital money, ”said Kellermann in his opening speech.
He urged members of the House of Representatives to put pressure on their Senate counterparts to pass a law that would revise requirements related to anti-money laundering and terrorist financing laws. He also proposed to instruct the Financial Stability Oversight Council, a monitoring department of the finance department, to create a framework for regulating cryptocurrencies and to develop guidelines for strong protection against money laundering and cyber threats for these marketplaces.
Explosion from the past?
In his testimony, Kellermann claimed that social media platforms are full of advice on "the potential use of dark wallet, a bitcoin purse that offers anonymity, by jihadists".
The use of capital letters in his written statement suggests that he specifically referred to Dark Wallet, one of the earliest anonymizing Bitcoin purses. This project appears to have been inactive for some time. The last code update was carried out in 2016 according to the GitHub website.
Related topics: Infosec Exec urges US lawmakers to tighten crypto regulation for pandemic fraud
Later Kellermann and Rep. Anthony Gonzalez (R-Ohio) used the term in a seemingly generic sense to refer to anonymization services.
See also: US lawmakers propose legislative bases for the national blockchain strategy
"You also talk about dark wallet as a platform where jihadists can circumvent your customer regulations and launder money," Gonzalez told Kellermann. "My question is, do we have the technology to turn off something like a dark wallet? Is that technologically possible? "
"I would not be a supporter of" let's say ", answered Kellermann.
Instead, he urged platform developers to freeze assets related to anything that has proven to be part of a criminal or terrorist conspiracy if requested.
"I think the FBI, Secret Service, and Secret Service have the ability to do more interesting things. But then again, I'm just an observer on the wall, sir, I don't have that much dark wallet expertise, ”Kellermann said.
Sherman weighs in
Representative Brad Sherman (D-Calif.), Who once said the Libra could be worse than September 11, raised concerns about cryptocurrency-based fraud.
Many scams identified by the North American Securities Administrators Association (NASAA) during the pandemic may have affected cryptocurrency investments, he said. In his view, the Securities and Exchange Commission (SEC) has refused to identify cryptocurrencies as securities.
"I believe the lack of SEC registration requirements makes cryptocurrencies attractive to those who have investment fraud," Sherman said.
He then asked Amanda Senn, a representative of NASAA and deputy director of the Alabama Securities Commission, what Congress could do to correct a system where investors are not protected.
"We have a legal framework for investing in cryptocurrency," Senn replied, referring to a country-level campaign aimed at educating investors about initial coin offerings (ICO) and online fraud.
"I believe that the state in particular can proactively prevent the prevalent types of fraud," said Senn.
Kellermann said that fintech companies must have clear incentives to protect themselves from intruders and to learn the anti-money laundering protocols set out in the Banking Secrecy Act.
He suggested that funds confiscated from cybercrime, including those related to cryptocurrencies, should be redirected through a decay fund to strengthen cyber security.
"Given that 50% of all crimes now have a cyber component, it is high time we followed the money to set up an international foreclosure fund," said Kellermann.
Gonzalez asked how such a fund could become a reality.
"We have to encourage developing countries to play ball with us," Kellermann replied.
See also: This is what a productive blockchain hearing in Congress looks like
Giving governments a percentage of their assets wasted in a study can motivate nations to take a stronger stance on cybercrime, he said.
An international fund would be the best option considering that most cyberattacks against the United States take place elsewhere, he added, suggesting that the Bank for International Settlements, the central bank of central banks, could do the job well.
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