We all know its illegal to kidnap someone and ask for a ransom payment. But should it also be illegal for the victim to pay the ransom?
Earlier this month the U.S. Treasury Department did just that. It notified the world that certain ransom payments are illegal, specifically those to sanctioned ransomware operators. Should a victim pay a ransom to a sanctioned entity, that person may face a big fine.
J.P. Koning, a CoinDesk columnist, worked as an equity researcher at a Canadian brokerage firm and a financial writer at a large Canadian bank. He runs the popular Moneyness blog.
Punishing ransom victims seems heartless. But it may be one of the best ways to protect the public from extortionists. And if it wants to make a serious dent in the growing ransomware market, the Treasury Department will have to go much further than putting a few entities on its sanctions list.
On Oct. 1, the U.S. Treasurys Office of Foreign Assets Control (OFAC) published a notice reminding everyone that several ransomware operators have been put on OFACs list of sanctioned entities, otherwise known as its Specially Designated Nationals (SDN) List. The agencys letter clarifies that should a victim make a ransom payment to an OFAC-sanctioned ransomware operator, that person could be breaking the law.
The ransomware wave
Ransomware is malicious software that blocks access to a computer system by encrypting data. Once the data is locked, the ransomware operator demands the victim pay a ransom in exchange for a decryption key.
The emergence of bitcoin, a digital, uncensorable asset, has made it particularly easy for ransomware operators to profit from their attacks. The earliest bitcoin ransomware strains targeted regular consumers with $300 or $400 ransoms. In 2019, operators like Sodinokibi, Netwalker and REvil began to move on to attacking corporations, municipal governments, school boards and hospitals.
The ransoms have gotten much larger. This summer, the University of Utah paid $457,059 in bitcoin for a decryption key. CWT, a travel company, paid $4.5 million to Ragnar Locker ransomware operators in July. The list of victims grows longer by the hour.
The damage involves more than just the ransom fee. Many organizations bravely refuse to give in to the ransomware operators demands. Rebuilding their network often costs more than the actual ransom payment. The crippled system will likely remain down for days, even weeks. The Government of Nunavut, a Canadian territory, couldnt serve citizens for almost a month after it refused to pay Dopplemayer ransomware operators.
A collective action problem
Societys response to ransomware is an example of a collective action problem. The public would be better off if everyone cooperated and refused to pay money to ransomware operators. With no incoming ransom income, the ransomware business would be unprofitable, attacks would cease and the collateral damage would stop.
Unfortunately, spontaneous cooperation between thousands of corporations, governments, and nonprofits is difficult to achieve. Any attempt to boycott ransom payments must rely on appeals to solidarity. But organizations will face pressure from shareholders or citizens to recover as quickly as possible, and so they will secretly pay. If 10% or 20% of victims defect from the boycott and pay the ransom, then the ransomware industry will be profitable and so everyone suffers as the blight continues.
Banning ransomware payments may not be the perfect option for stopping the growing ransomware wave, but it may be the best option weve got.
One way to fix the collective action problem is for the government to help push the public towards the best solution. The government can do this by declaring ransom payments illegal, and setting a penalty for rule breakers. The punishment for breaking the law would be a $20 million fine, or something like that.
Now when a ransomware operator attacks, all the victims cooperate by default. No, we cant pay you. If we do, well have to pay an even larger fee to the government. Ransom payments will stop, ransomware operators will cease their attacks and the damage ends.
The market for bribes as an analogy
Using the government to arrive at the best solution to a collective action problem isnt without precedent. Another type of shady payment, the payment of bribes, provides a useful analogy.
If companies must habitually bribe foreign government officials for contracts, then that drives up the costs of doing business. The public would be better off if everyone refused to pay a bribe. But cooperation is difficult.
Until the 1970s and 80s, foreign bribes were valid tax deductions in many countries. But efforts like the U.S.s Foreign Corrupt Practices Act of 1977 (FCAP) made it unlawful to bribe foreign government officials. Multinationals can now push back against bribery requests by pointing to FCAP. This helps push society arrive at the no-bribe solution.
The U.S. Treasurys recent clarification about the illegality of certain ransom payments only goes part of the way. It prohibits payments to a few bad actors, but there are many ransomware operators that do not appear on OFACs SDN list. To help solve the collective action problem, OFAC would have to be more proactive in designating ransomware operators.
Sussing out the names and identities of all the producers and distributors of ransomware seems like an impossible task, however. It would be much easier to declare a blanket ban on all ransomware payments, just as how FCAP bans bribery. Ransom bans arent without precedent. In response to a wave of kidnappings by organized crime, Italy prohibited ransom payments in 1991. Colombia and Switzerland have also made ransom payments illegal. The Group of Seven has a long-standing policy of refusing to pay ransoms for hostages of terrorist groups.
The knock against prohibiting either bribes or ransom payments is that it forces the market to become more opaque. If it is legal to make a bribe, then the bribe payer can report the bribe taker. This serves to limit the market for bribes. Ban bribes and the bribe payer is incentivized to cooperate with the bribe taker to keep things secret.
This is why Kaushik Basu, the former chief economist at the World Bank, has long advocated for legalizing bribe payments.
As for ransomware, victims who pay a ransom can report the attack to law enforcement agencies like the Federal Bureau of Investigation without fearing a fine. This allows the FBI to follow up. But if it is illegal to pay a ransom, then victims that choose to pay will keep their actions a secret. Lacking accurate data, the FBI will do a poorer job of defending against ransomware.
The other knock against banning ransomware payments is the perceived inhumanity of it. Try telling a mother or father that it is illegal for them to pay a ransom to free their kidnapped child. The same goes for ransomware. A school board that has been crippled by ransomware can immediately resume classes by paying a $20,000 bitcoin ransom. But under a prohibition, children may have to go a week or two without classes as the school board rebuilds its systems.
There are also civil liberties concerns. Businesses will argue that a ban on ransoms infringes on their ability to control their property.
Bitcoin isnt Green Dot
When extortionists find profitable ways to bilk the public, one way to fight them is to make changes to the underlying payments platform that the scammers are using. Internal Revenue Service scammers converged on Green Dot MoneyPak cards in the mid 2010s as a useful way to extort innocent Americans. The chosen solution wasnt to tell victims that paying ransom was illegal. Rather, Green Dot Bank pulled the product for a year and reprogrammed it. And it worked. Criminals have moved on from using MoneyPaks to do IRS scams.
Unlike MoneyPaks, bitcoin cant be reprogrammed. That leaves society with one less option for protecting itself from ransomware attacks. And so the no payment solution to the collective action problem beckons. Banning ransomware payments may not be the perfect option for stopping the growing ransomware wave, but it may be the best option weve got.
Read more from the original source:
Ban All Ransomware Payments, in Bitcoin or Otherwise - CoinDesk - CoinDesk
- Bitcoin analysts explain what's next in the aftermath of BTC plunging to $16.2K - Cointelegraph - November 28th, 2020
- Bitcoin loses steam after nearing all-time highs, but trader says it could be on track to $74,000 - CNBC - November 28th, 2020
- Bitcoin plunges by nearly $3,000 after closing in on its all-time record - CNBC - November 28th, 2020
- Veteran Analyst Says BTC Might See Further Correction but 'Prices Have Not Topped' | Markets and Prices - Bitcoin News - November 28th, 2020
- Bitcoin's Carnivore Cult Is Both Stupid and Correct - CoinDesk - Coindesk - November 28th, 2020
- Ether, XRP and other 'altcoins' rally as bitcoin heads for all-time high - CNBC - November 28th, 2020
- Mike Novogratz: Everyone Should Put 2% to 3% of Their Net Worth in Bitcoin | News - Bitcoin News - November 28th, 2020
- Why Bitcoin price just hit $19,000 for the first time in 3 years - Cointelegraph - November 28th, 2020
- Will 'money printer go brrr' rob Bitcoin of its all-time high? - Cointelegraph - November 28th, 2020
- Why Is Bitcoin's Price Rising? Here Are a Few Possible Answers - CoinDesk - November 28th, 2020
- OKEx Sees Biggest Bitcoin Outflow in 8 Months After Resuming Withdrawals - CoinDesk - CoinDesk - November 28th, 2020
- Bitcoin faces this final resistance zone before $20K all-time high - Cointelegraph - November 28th, 2020
- EURST Stablecoin Reinvention of the European Economy | Sponsored - Bitcoin News - November 28th, 2020
- Bitcoin hopes of record value of over $20,000 dashed after cryptocurrency falls again - Sky News - November 28th, 2020
- Should you invest in Bitcoin and how to do it - Telegraph.co.uk - November 28th, 2020
- Russian Hospitalized After Bitcoin Mining Farm Sets Apartment on Fire - CoinDesk - CoinDesk - November 28th, 2020
- Researcher Publishes Never Before Seen Emails Between Satoshi Nakamoto and Hal Finney - Bitcoin News - November 28th, 2020
- OKExs Withdrawal Suspension Isnt Behind Bitcoins Rally: Analysts - CoinDesk - CoinDesk - November 28th, 2020
- Bitcoin now has a 7% chance of beating $20K highs in the next 2 months - Cointelegraph - October 23rd, 2020
- For the first time since 2018 Bitcoin balances on exchanges fell below 2.5M - Cointelegraph - October 23rd, 2020
- Bitcoin top signal from 2017 reappears, but heres why it may not matter this time - Cointelegraph - October 23rd, 2020
- First Mover: PayPal Rushes In and Bitcoin Breaches $12K, While USDC Gains on Tether - CoinDesk - CoinDesk - October 23rd, 2020
- Macro Investor Dan Tapiero on Crypto Adoption: Emerging Economies Ahead of Developed States | News - Bitcoin News - October 23rd, 2020
- Hotel Bitcoin ATMs on the Rise With Addition of Swiss Hotel Dolder Grand | News - Bitcoin News - October 23rd, 2020
- World Gold Council Survey Shows Cryptocurrency Investment the 5th Most Popular in Russia - Bitcoin News - October 23rd, 2020
- Ethereum Q3 Volume Dwarfs Bitcoin's, Fueled by DeFi - Decrypt - October 23rd, 2020
- Crypto fans rejoice: Bitcoin rallies to the brink of $12,000 - Aljazeera.com - October 23rd, 2020
- 187,000 BTC Drained: Over $2 Billion in Bitcoin Leave the Top Exchanges Since June | Exchanges - Bitcoin News - October 19th, 2020
- A Former Goldman Sachs Hedge Fund Chief Has Predicted Bitcoin Will Surge To $1 MillionHeres Why - Forbes - October 19th, 2020
- Bitcoin minings future is green, and Russia has the best chance - Cointelegraph - October 19th, 2020
- Has Bitcoin Finally Met Its Match? - Forbes - October 19th, 2020
- Bitcoin rips and cruise ships: Bad crypto news of the week - Cointelegraph - October 19th, 2020
- Where Does Bitcoin Fit in the Global Reserve Currency Game? - CoinDesk - Coindesk - October 19th, 2020
- Enormous wall of money will send Bitcoin to $1M in 2025 Raoul Pal - Cointelegraph - October 19th, 2020
- Bitcoin's Intrinsic Value: Crypto Community Responds to Bank of England Governor | News - Bitcoin News - October 19th, 2020
- Bitcoin Price Ready For a New Pop Will It Do It Today? - InvestingCube - October 19th, 2020
- 'Enormous Wall of Money' Coming Into Bitcoin, Price to Reach $1 Million in 5 Years, Says Raoul Pal - Bitcoin News - October 19th, 2020
- Bitcoin and Ripple's XRP - Weekly Technical Analysis October 19th, 2020 - FX Empire - October 19th, 2020
- Blockchain Bites: Bitcoin on Ethereum The Whos, Whats and Whys - CoinDesk - CoinDesk - October 19th, 2020
- First Mover: Privacy Is Litecoin's Ace in the Hole as JPMorgan Touts Bitcoin - CoinDesk - CoinDesk - October 19th, 2020
- Hathor Merge Mining Pool Commands 33% of the Bitcoin Cash Hashrate - Bitcoin News - October 19th, 2020
- Cashfusion Use Increased by 328%, $200M in BCH Fused and Close to 20,000 Fusions | Privacy - Bitcoin News - October 19th, 2020
- The Silk Road Balance Sheet Discrepancy: Bitcoin Worth $4.8 Billion Still Missing | Featured - Bitcoin News - October 19th, 2020
- Bitcoins Taproot is ready to go, but it's unlikely to be included in the next release - Cointelegraph - October 19th, 2020
- How will the US presidential election affect the price of Bitcoin? - Cointelegraph - October 11th, 2020
- $12K Bitcoin price back on the table after BTC rallies above $11.4K - Cointelegraph - October 11th, 2020
- Coinbase's 'Mission' Violates the Spirit of Bitcoin - CoinDesk - CoinDesk - October 11th, 2020
- Bitcoin: the UK and US are clamping down on crypto trading here's why it's not yet a big deal - The Conversation UK - October 11th, 2020
- Lyn Alden: Bitcoin Correlations Depend on What Phase It Is In - CoinDesk - CoinDesk - October 11th, 2020
- UK Bans Sale of Crypto Derivatives to Retail Investors from January 2021 | News - Bitcoin News - October 11th, 2020
- Yearn Finance Token Value Slides 67%, While Locked Value Loses Over $300M | Altcoins - Bitcoin News - October 11th, 2020
- Bitcoin price holds $10.5K but a $30M sell wall looms overhead - Cointelegraph - October 6th, 2020
- Bitcoin To Hit $100,000 in Five Years as Demand and Adoption Increase - Report | Markets and Prices - Bitcoin News - October 6th, 2020
- Trump, price dots and COVID-19: 5 things to watch in Bitcoin this week - Cointelegraph - October 6th, 2020
- $8M Worth of 'Sleeping' Bitcoin Rewards from 2010 Moved the Day Before 'Black Thursday' - Bitcoin News - October 6th, 2020
- Interest in Bitcoin Soars in Egypt Amid Economic Crisis and Unemployment | News - Bitcoin News - October 6th, 2020
- A Major Tesla Investor Has Predicted Bitcoin Will Be Worth More Than $1 Trillion In Under 10 Years - Forbes - October 6th, 2020
- Crypto for Congress: Bitcoin Sent to All Congress Members' Campaigns | News - Bitcoin News - October 6th, 2020
- Stacking Satoshis: Leveraging Defi Applications to Earn More Bitcoin | Featured - Bitcoin News - October 6th, 2020
- FCA bans the public from Bitcoin and other cryptocurrency derivatives - Evening Standard - October 6th, 2020
- Pro-Crypto PAC Giving $50 in Bitcoin to the Campaign of Each Member of Congress - CoinDesk - CoinDesk - October 6th, 2020
- Ethereum Transaction Fees Fall 82%, as Defi Hype Eases | Altcoins Bitcoin News - Bitcoin News - October 6th, 2020
- Crypto for Congress sends $50 in Bitcoin to all US Congress members - Crypto News Flash - October 6th, 2020
- Abkhazia Lifts Two-Year Ban on Bitcoin Mining, Moves to Regulate the Sector | Regulation - Bitcoin News - October 6th, 2020
- Why reduced Bitcoin futures volume may signal the start of a new bull trend - Cointelegraph - October 2nd, 2020
- Market Wrap: Bitcoin Rebounds to $10.5K; Stablecoin Market Cap Goes Parabolic - CoinDesk - CoinDesk - October 2nd, 2020
- Spike in new participants buying Bitcoin is obviously bullish Analyst - Cointelegraph - October 2nd, 2020
- Romania set to auction Bitcoin and Ether confiscated in criminal case - Cointelegraph - October 2nd, 2020
- Bitcoin Balances on Exchanges at 2-Year Low and That May Be a Bullish Sign - CoinDesk - CoinDesk - October 2nd, 2020
- Venezuela To Start Using Cryptocurrency in Global Trade in Efforts To Fend off US Sanctions | Emerging Markets - Bitcoin News - October 2nd, 2020
- Bitcoin Posts a 66-Day Consecutive Streak Above the $10K Price Range | Markets and Prices - Bitcoin News - October 2nd, 2020
- Aurus Disrupts the Gold Industry Today Its Ecosystem Lists at a Value of $75m | Sponsored - Bitcoin News - October 2nd, 2020
- Satoshi Nakamoto's Peer-to-Peer vision for Bitcoin - Korea IT Times - October 2nd, 2020
- Crypto Bets on the US Election Show Joe Biden Winning the Presidency by 60% - Bitcoin News - October 2nd, 2020
- At $10,600, Bitcoin price is on track for its second-best quarter ever - Cointelegraph - September 30th, 2020
- Devere Group CEO Predicts Bitcoin Can Replace Gold as Top Safe-Haven Within a Generation | Finance - Bitcoin News - September 30th, 2020
- Ex-CEO of Bitcoin.com, a Leading Proponent of Bitcoin Cash (BCH), Joins Nodle's Board to Help Develop the Nodle Cash Ecosystem - GlobeNewswire - September 30th, 2020
- Trump, tax and hacks: 5 things shaping Bitcoin price action this week - Cointelegraph - September 30th, 2020
- One of Hal Finney's lost contributions to Bitcoin Core to be 'resurrected' - Cointelegraph - September 30th, 2020
- French police arrest terror financing ring that used Bitcoin coupons - Cointelegraph - September 30th, 2020