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The consequences of the spread of virtual currency for national security: a study of the prospects for the use of virtual currency by non-state actors
Material posted: Medvedev DmitryPublication date: 16-05-2016
In the report "National security implication of virtual currency: examining the potential of non-state actor deployment" known analytical Corporation RAND American experts examine the problems and prospects of the proliferation of virtual currencies, particularly bitcoin, as well as identify possible threats and risks to national security of the US and its allies associated with using crypto-currencies for economic transactions by terrorist groups, the major gangs-formations, syndicates and non-state and quasi-state participants of international relations.

RAND experts noted that the development of digital currency is a natural result of development of information and communication technologies, as well as the reaction of commercial structures in the continuous improvement of financial control over the economic transactions of the state.

The key conclusions reached by analysts, are as follows:

  • virtual currency is reliable tool for storing data in a distributed environment, which is successfully protected from unwanted changes and allows, for example, to disseminate information (through online blogs, social networks, forums, etc.) with protection from intervention by national States;
  • one of the important conditions for the proliferation of virtual currency in a particular area is macroeconomic instability and the weakening of the national currency. As noted in the report, the transition to virtual currency as possible "if the state refers to a failed (failed state), ... if the country is in a state of civil war and if a strong, stable government could not provide a coherent macroeconomic policy, or ... in the country is the informal sector of the economy" (p. 26);
  • the need to develop security mechanisms for virtual currency encourages the development of advanced cryptographic techniques such as secure multi-computation, which provides the implementation of distributed computing while preserving privacy of the inputs and outputs in the Commission of malicious acts. Technology peer-to-peer decentralized blockchain systems used in the system of virtual currency in addition to Finance can be used for other purposes, in particular for storing encrypted data and providing secure communications;
    the proliferation of virtual currency is the next step towards the development of a decentralized cyber-services. The historical trend is that the blockchain services and methods of decentralization will ensure that the undeveloped technically non-state actors the opportunity to be protected from the actions (counter, control) from the most technologically advanced actors (nation-States) (p. 59);
  • the transition to payment in virtual currencies appear to be attractive to non-state actors intending to strengthen their economic and political power, displacing the state currency. The transition of non-state actors with the digital currency is expected in the medium term.
    the use of virtual currency as the Foundation of the financial system requires a non-state actor with a high level of technical resources, advanced network infrastructure and availability of qualified personnel, that is, those resources that are present in the majority of non-state actors in limited quantities;
  • at the moment the virtual currency has limited economic potential, as the majority of the public does not perceive her as a real, legitimate, and not ready to renounce the usual, "physical" currency in the classic sense. We believe that the virtual currency will change for the better as you increase the citizens ' confidence in new technologies. In addition, in areas where virtual currency will be the only publicly available, people will easily move to it, although in other circumstances probably would not have done;
  • virtual currency treated as kiberservis, respectively, attacks on him will not be radically different from the ways of neutralization of other cyber-entities. Decentralization increases resistance to cyber attacks, but does not make these cyber-services are invulnerable;
  • as promising methods of attack on the system of virtual currency submitted as DDoS mining pools, and zero-day exploits to the services of virtual currencies and wallets, a violation of the very principles of the use of virtual currency, such as the acquisition of more than half of bitcoin computer power.

According to the authors, the U.S. Department of defense should be applied "preemptive strike" and disrupt decentralized digital currencies.

However, analysts say that in addition to the challenges, the proliferation of digital currencies can be beneficial to the United States, in particular when supported by Washington of non-state actors oppose a hostile nation-States, forming their own alternative monetary system. The introduction of virtual currency will be successful in providing and "binding" it to a real, existing state currency (p. 42), which can provide a nation-state supporting non-state actor.

In addition, it is noted that efforts to counter the online currency systems will be more effective now, when the majority of the public has not formed a trust to such structures. Subsequently, when such digital currencies will increasingly be used by ordinary citizens, will make it harder to do.

Dmitry Medvedev

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