No, the Feds Did Not “Break Bitcoin” After Colonial Ransomware Attack After criminal hackers breached the security of the Colonial Pipeline with ransomware on April 29 and shut down much of the oil and gas flowing to a vast East Coast market, cryptocurrency entered the story as a major player in the events as they would unfold.
The hackers demanded millions on payment in the form of Bitcoin to “pay the ransom” and unlock the pipeline system. Colonial agreed to pay what was said to be $5 million.
Days later, the FBI triumphantly reported they had penetrated the Bitcoin ransom stash and had clawed back most of the money. While this was widely celebrated, rumor immediately began to circulate that the Feds and found a way to “break Bitcoin.”
Cryptocurrency Comes Out Shining
A closer look at the situation, however, shows that Bitcoin was not only not broken, but the cryptocurrency functioned exactly as it should have in a crisis situation. In fact, the partial resolution of the Colonial Pipeline affair actually bolsters the advantages of Bitcoin from both a law enforcement perspective and as a responsibly performing legal tender.
First, Bitcoin itself was not “hacked” by the government. They didn’t have to. That’s because Bitcoin relies on public blockchain. One of the advantages of blockchain is that it guarantees a high level of transparency. In short, cybersecurity professionals were able to follow the “trail of breadcrumbs” that blockchain leaves behind.
Second, after blockchain revealed where the ransom stash was located, the FBI obtained an “old-fashioned” warrant to seize the money in the same way it would seize a suitcase full of paper cash from a drug dealer.
Bitcoin worked just as it should have in this situation. The FBI did not need to “hack,” “smash,” or “break” Bitcoin because they were able to obtain the password to the Bitcoin address they needed.
Not as Unregulated as Believed
One of the most persistent myths about Bitcoins and other such brands is that they function in a kind of “Wild West” global milieu, skirting borders and operating completely under the radar of any kind of regulation.
That’s simply not true.
Such agencies as the IRS, the Financial Crimes Enforcement Network of the Treasury Department and others have considerably developed rules in place that already represent a good measure of regulatory control. Some even argue today that cryptocurrencies are already “overregulated.”
The bottom line is that the Colonial Pipeline event did not ”break Bitcoin.” If anything, it burnished its image as a legitimate financial instrument.