April 27, 2022
The recent Ukraine conflict has not only triggered boycotts, blacklisting, and demonstrations, but also a wave of charitable donations in cryptocurrencies. Ukraine has received an estimated $100 million for humanitarian and military purposes. $50 million in crypto donations since the conflict started, spurred on by the Ukrainian government asking for donations in various cryptocurrencies in various tweets. The Ukrainian government tweeted that it would accept donations in Bitcoin, Ethereum, Tether, Polkadot, Dogecoin, TRON, Solana, and even non-fungible tokens (NFTs). This makes the conflict a first-ever opportunity for crypto investors to funnel financial support while avoiding the classic banking systems that are under western sanctions.
The option for charitable donations in cryptocurrencies has also triggered cryptocurrency scams with fraudsters claiming to be fundraising for Ukraine. Furthermore, as the United States Treasury pointed out, Russia could retaliate by conducting cyberattacks on crypto companies, especially cryptocurrency exchanges, to stop the money flow to the Ukrainian government and charities. But Russia itself could also turn to cryptocurrencies to circumvent western sanctions. The EU tried to prevent this by targeting crypto wallets, banks, currencies and trusts in its fifth package of sanctions on Russia.
To complicate matters, global crypto exchanges have refused to cut off Russian users completely, pointing out that a blanket ban would unfairly target ordinary citizens. This leaves the door open for Russian oligarchs and large organizations whose assets are frozen, to still move money around in the form of cryptocurrencies.
Would this be 100% effective? Nor really, since cryptocurrency leaves traces, which is bad news for entities under boycott and threat actors alike. Also, the blockchain ecosystem was never designed for processing large volumes of money anonymously. That’s why the options for laundering stolen crypto are limited, especially if massive sums are involved. This means that cashing out large sums in cryptocurrencies is difficult, not only for the superrich, but also for threat actors such as the culprits behind the recent $ 600m Ronin heist.
So how do we keep cryptocurrencies safe? And in case of illicit movement of cryptocurrencies, how do we trace them?
On a technical level, cryptocurrencies run on a blockchain, which describes the way transactions are recorded into “blocks” and time-stamped. This distributed public ledger records all updated transactions. The owners/users of cryptocurrencies can only access their crypto wallets using their private keys to prove they are the legitimate owners of their wallets. This, combined with the peer-to-peer nature of blockchain, keeps translations well-hidden and well-protected.
To follow the crypto money trail, a blockchain analysis must be conducted to detect, categorize, and model the digital footprints left behind in the blockchain transaction process. This will uncover key information about the individuals who conducted these transactions, even if they used different cryptocurrencies.
The European Union is in favor of tracing cryptocurrencies. On March 31, 2022, the European Parliament approved new rules to trace and identify crypto-asset transfers, in a bid to prevent their use in money laundering and other illegal activities. This makes the need for efficient blockchain analysis solutions even more pressing. Automated solutions powered by advanced AI algorithms are in high demand, since such a platform can constantly identify the technical details of online activities, behavior, and other relevant information as well as analyze the collected data to find connections, even if these are present on the deep web and dark web.
Therefore, a tool such as the AI-powered WEBINT platform of Cobwebs is crucial for tracking, tracing, and recovering digital assets. Such a process allows an investigator to:
- Identify the individual or legal entity suspected of illegally moving cryptocurrencies;
- Gather information about that individual / legal entity as well as their associates, transactions, and assets;
- Determine connections between that individual / legal entity and their assets
- Follow the (crypto) money
- Take appropriate action
For wallet holders that want to fund good causes using their crypto coins, keeping their private key confidential is crucial. For authorities to make sure that cryptocurrencies transactions are legit, adding the Cobwebs platform to their toolset is a good idea.