FBI Report on Bitcoin Cryptocurrency

The US Federal Bureau of Investigation is concerned about the potential for money laundering and other criminal activities in the anonymous Bitcoin payment system. These are the conclusions that can be made by reading the document titled “Virtual Currency Bitcoin : Unique Features Present Distinctive Difficulties in Restraining Illegal Activities” (“ Bitcoin Virtual Currency: Unique Features Present Distinct Challenges for Deterring Illicit Activity” ).

Published on April 24th, the report is not classified, but is marked as a document solely for official use, and it was leaked to the Internet on May 9th. The document shows not only the assessments of the system, but also unintentionally describes tips for cryptocurrency users, following which they can remain more anonymous.
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The FBI notes in the paper that since, for the sake of excluding the central authorities, Bitcoin operates with cryptography and peer-to-peer network architecture, which is not at all similar to the principles of e-Gold and WebMoney, it will be much more difficult for legal organizations to identify suspicious users.

Bitcoin is an anonymous cryptocurrency that allows buyers and sellers to make anonymous transactions. Bitcoin coins are accepted in many stores selling quite ordinary goods, for example, clothes or music, but Bitcoin is also used as a payment in underground organizations that sell illicit drugs.

In order to receive money on hands, the recipient will be forced to exchange bit-coins for, for example, US dollars or British pounds through a third-party service. The FBI is confident that the authorities are still able to detain suspects who use third-party Bitcoin-related services that require the input of personal data or banking information to exchange Bitcoin coins in traditional currencies. However, the report notes that the use of offshore services that do not require reliable personal data can frustrate such plans.

The FBI report describes the routine operations of the system: coin generation, transfer and receipt. An interesting estimate of the total money supply of Bitcoin: according to the exchange rate of the previous month, 8.8 million bit coins cost about 4 or 5 each, and the FBI estimates the value of Bitcoin's economy from 35 to 44 million US dollars.

“If Bitcoin strengthens and increases its own popularity, it will increasingly become a useful tool for various illegal computer activities. For example, such activities as child pornography and online gambling, which require a simple payment system, are already taking place on the Internet. Bitcoin can attract money launderers, traffickers, terrorists and other criminals who avoid traditional financial systems by making money transfers via the Internet. ”

Data on all Bitcoin transactions is publicly available, but the only information that identifies the user of the system is his address, which makes transactions anonymous. Or almost anonymous. As the FBI notes, anonymity depends on the user's actions.

Since the user's Internet address is published on the network at the time when he makes transactions, non-accessing heightens the risk of detection by law enforcement agencies that have access to methods for matching the user and his network address. Last year's report by Irish researchers pointed out that the analysis of the publicly available information of the Bitcoin network (transaction records, the publication of users of their keys), subject to the availability of information resources available to government agencies (banking data, addresses of deliveries of goods), makes it possible to identify many users.

The FBI carefully lists a few tips (albeit not entirely original) that can help protect anonymity:

Every time you receive funds, use the new address.
Redirect all Bitcoin traffic through the anonymizer.
Collect all the coins from your addresses in one for the new payment.
Use specialized money laundering services.
Use third-party e-wallet services to consolidate addresses.
It is possible to create new versions of the client, which can help increase anonymity due to new functions, for example, choosing from which Bitcoin address to pay, etc., which will help improve the anonymity of their transactions by not understanding technology.

But far more dangerous is not the identification of users, but hackers who can clear someone else's wallet. There have already been cases of using malware to steal wallet files, such as the June, as the victim claims, theft of 25,000 bitcoins. Last year, the program Infostealer.Coinbit was discovered, which was specifically created to steal the Bitcoin currency from virtual wallets.

Indicates hacking servers hosting provider "Linood". The report recorded attempts to create botnets for generating coins by means of infected machines. The report cites an anonymous source, labeled as “trusted,” which reported a compromised computing cluster at an unspecified university located in the middle west of the United States; more detailed information about the incident is not given.