Blockchain: organised crime’s new best friend

Blockchain: organised crime’s new best friend


The way security is secured in the information age is fundamentally changing. Traditional methods of policing are increasingly ineffective in dealing with the capabilities of organised crime, with groups taking advantage of novel forms of financial technology (fintech) to evade detection and disruption. Blockchain in particular is a technology exploited in service of the growing criminalisation of cyberspace. How we respond to an increasingly complex, pervasive and multipolar suite of threats is a crucial question policy-makers, and the public, must face.

Perhaps the most consequential development in cyber tech in recent years is the proliferation of cryptocurrencies and the blockchain technology that underpins their use in transactions. Conceived of in a 2009 paper written by the pseudonymous Satoshi Nakamoto, blockchain comprises software that enables decentralised, anonymous peer-to-peer transactions via a digital ledger that encrypts such transactions. The encryption works on the basis of time-stamped data shared between all parties that use it, making manipulation of such data extremely impracticable. Since its launch with the associated bitcoin cryptocurrency, blockchain has rapidly risen to the forefront of the emerging fintech market, enabling companies and private individuals alike to make transactions without the need for a third party such as a bank.

New technology presents novel problems, and this is acutely the case with regard to blockchain. A pressing example is the threat presented by the use of blockchain and cryptocurrencies by organised crime. As the seminal crime drama The Wire demonstrated, modern police and law enforcement agencies are locked in a constant game of catch-up with a black market that rebuilds itself around the exploitation of novel forms of communication. In the show, police set up wiretaps on pagers, only for the criminals they pursue to switch to so-called ‘burner phones’. The increased anonymity provided by the latter keeps the gangs out of reach of surveillance operations, allowing them to operate unhindered. In the decade since the show ended, the logic of organised crime remains the same, but the tools that enable it have fundamentally changed.

Blockchain is a criminal’s dream; the near unbreakable encryption it offers and the anonymity that comes with it is regularly exploited by criminal organisations in setting up international trafficking routes. Drugs, weapons, intellectual property, dirty money, even people are sold and exchanged with increasing impunity. Law enforcement agencies are now often faced with criminal networks that operate beyond their jurisdictions across far-flung countries and continents, linked up by anonymous communications and payments systems without the need for face-to-face interaction. Whereas phone conversations, including those on ‘burner’ devices, can ultimately be traced to a baseline level of accuracy, blockchain leaves very few crumbs for investigators to follow. Such technology also helps ameliorate logistical issues for organised crime, especially moving large sums of cash around. A million pounds is physically a large amount of money; storing and transporting it thus comes with a host of risks and opportunities for discovery from law enforcement. Use of the digital wallets and cryptocurrencies enabled by blockchain eliminates the need for such costly operations; moving tens of millions of pounds is now just a few mouse clicks away.

The challenges posed by blockchain and cryptocurrencies are those that are simply too big for any one nation to effectively address. The internet does not respect sovereign borders nor the complicated web of treaties, conventions and international laws that govern the relationships between different states and their respective law enforcement agencies. If any progress is to be made in tackling these problems, new legal frameworks and multinational agreements need to be reached to allow effective responses. Lawmakers and diplomats face two acute problems in this pursuit. First is the exceptional complexity of designing legislation that is flexible enough to address the fast pace of change in the capabilities afforded to criminals as well as allowing cooperation between multiple law enforcement agencies across different countries and regions. The second, more existential issue is how to do this whilst respecting the privacy of legitimate users of blockchain and ensuring their data is secure.

Isolationist and nationalist trends in the current geopolitical climate have so far undermined the dialogue and cooperation that are necessary to tackle these issues. One change borne out of the pandemic is the growing recognition in policy circles and public discourses that this trend needs to be reversed – that we cannot have viable security without meaningful relationships and a strong degree of cooperative spirit. Nevertheless, much action remains frozen by a habit of seeing relationships as a zero-sum game. If states are to tackle burgeoning online crime networks, they need to adopt a new way of conceptualising their ties to each other and to be more creative in defining the limits of sovereignty.

There are the stirrings of organised efforts to combat organised crime online, worthy of consideration as societies debate on the best way to move forward on this issue. In Europe, the EU alongside a consortium of partners has developed project TITANIUM (Tools for the Investigation of Transactions in Underground Markets). This aims to develop tools to reveal the common characteristics of criminal transactions and identify where such transactions are being made. Due to the inherent need to collect and store data from vast numbers of online transactions, developing ethical and legal guidelines to regulate such tools is a vital component of addressing crime. It is essential that the solution isn’t worse than the problem. Large-scale data collection is already a highly contentious issue and needs to be seen by the public to be kept in check by a system of effective guarantees and constraints if it is to be utilised. There is no closing the lid on blockchain; what is required now is a proactive approach that understands the dynamic nature of this new technology and can build tools and legislation that anticipates rather than merely reacts to this.

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