The use of cryptocurrencies in various criminal activities has become increasingly prevalent, according to Europol’s latest Internet Organised Crime Threat Assessment (IOCTA) report released today (Monday). The European Union’s law enforcement agency highlights the growing role of digital assets and artificial intelligence in cybercrime, signaling potential challenges for investigators and regulators alike.

Cryptocurrencies Fuel Cybercrime Surge, Europol Warns in Latest Threat Assessment

In its 10th annual IOCTA report, Europol emphasizes that cryptocurrency adoption among cybercriminals has expanded beyond traditional use cases, permeating a wider array of illicit activities. This trend poses significant concerns for law enforcement agencies struggling to keep pace with rapidly evolving criminal tactics.

Catherine De Bolle, the Executive Director of Europol

“In 2023, millions of victims across the EU were attacked and exploited online on a daily basis. Small and medium businesses were increasingly popular targets for cyber-attacks, while e-merchants experienced the most digital skimming attacks,” commented Catherine De Bolle, the Executive Director of Europol. “Adults were victimized through phishing, investment and romance frauds, and more and more minors were targeted by child sexual exploitation offenders and online sexual extorters

The report specifically points to the potential abuse of emerging financial products tied to cryptocurrencies. As it suggests, the introduction of Bitcoin exchange-traded funds (ETFs) has allowed a much larger group of investors to speculate on cryptocurrencies without the need to physically possess them.

„Scammers could abuse the rise of ETFs related to cryptocurrencies as people who do not have extensive experience in cryptocurrency will become increasingly exposed to them,” commented Europol. “Companies issuing cryptocurrency ETFs will also have to hold large reserves in cryptocurrency, which might make them valuable targets for fraudsters.”

Europol’s findings come amid a backdrop of fragmentation in the cybercrime landscape. Recent law enforcement actions have forced ransomware groups to splinter and rebrand, while continuous takedowns of dark web forums have shortened the lifecycle of criminal online marketplaces. This instability has contributed to a multiplication of cyber threats, with millions of EU citizens falling victim to online attacks daily.

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Europol actively pursues crimes involving cryptocurrencies. A recent incident in May led to the arrest of six individuals and the recovery of €750,000 from a cryptocurrency scam. Last year, the agency also warned about crimes using DeFi and NFT technologies, though it supports the use of blockchain in enhancing cybersecurity. Three years ago, Europol dismantled a criminal group responsible for stealing $100 million in cryptocurrencies.

Artificial Intelligence Helps Scammers

The report also sheds light on the evolving nature of cybercrime tactics. Multi-layered extortion schemes have become more common, with stolen data at risk of being published or auctioned, leading to potential re-victimization. Additionally, the assessment notes a concerning trend of underage offenders engaging in cybercriminal activities, some of whom are already leveraging artificial intelligence (AI) tools.

“Cybercriminals are keen to leverage Artificial Intelligence, which is already becoming a common component in their toolbox and is very likely to see even wider application. Law enforcement agencies are expected to build a robust capacity to counter the growing threats stemming from this, both in terms of human resources and technical skills,” added De Bolle.

Looking ahead, Europol anticipates that AI-assisted cybercrime will pose growing challenges, particularly in the realm of child sexual abuse material (CSAM). The agency warns that AI-altered and completely artificial CSAM will complicate investigations, making it harder to identify victims and perpetrators.

A report from Finance Magnates this April indicated that nearly 50% of companies are targeted by AI-generated deepfakes. The payment, money transfer, and personal banking sectors are particularly vulnerable to cybercrime in this regard. As scammers increasingly utilize AI for malicious purposes, companies like Mastercard are employing this technology to shield consumers from fraud, especially significant as the annual cost of cybercrime is projected to reach $10.5 trillion next year.

What to Expect in the Near Future

Based on the information provided in the IOCTA 2024 report, there are 7 key developments to expect in the near future regarding cybercrime and digital threats:

• Increased AI-assisted cybercrime: AI tools are becoming more prevalent in criminals’ toolboxes, with a particular concern for AI-assisted creation of child sexual abuse material (CSAM).
• Rise in AI-altered and artificial CSAM: This trend will pose growing challenges for law enforcement in identifying victims and offenders, as well as managing the increased volume of CSAM in circulation.
• Expanded use of cryptocurrencies in various crime areas: Digital assets are expected to play a more significant role across a wider spectrum of criminal activities.
• Potential abuse of cryptocurrency-related financial products: The report warns that scammers could exploit the rise of exchange-traded funds (ETFs) tied to cryptocurrencies.
• Continued fragmentation of cyber threats: Due to law enforcement actions and market instability, cybercriminal groups are likely to continue splintering and rebranding, leading to a multiplication of threats.
• Increased use of multi-layered extortion tactics: Criminals are expected to continue employing complex extortion schemes, including the threat of publishing or auctioning stolen data.
• Growing challenges related to end-to-end encryption (E2EE): The widespread use of E2EE communication platforms by offenders will create ongoing difficulties for law enforcement in accessing criminal communications.

To address these mounting digital challenges, Europol emphasizes the need for law enforcement agencies to stay ahead of the curve. The agency calls for enhanced knowledge, tools, and legislation to effectively combat evolving cyber threats.

The IOCTA 2024 report serves as a reminder of the dynamic nature of cybercrime and the critical role that cryptocurrencies now play in this landscape. As digital assets continue to gain mainstream acceptance, the challenge for law enforcement to balance innovation with security becomes increasingly complex.