THE CHINESE $13 BILLION KLEPTO-CURRENCY HEIST REVISITED

These paragraphs contain the salient points of my analysis in last week's News and Views, and the first thing to note is that this story is actually five years old, an important point that we shall return to momentarily; secondly, concerns asset seizure of Chinese crypto-currency assets (which we like to nickname "Klepto-currency" for reasons being outlined here), and thirdly, that this particular asset seizure occurs in an international geopolitical context, which is to say that it occurs in (a) a largely unregulated context, in spite of the disclaimers from American authorities referred to later in the article that "the seizure followed established legal processes targeting illicit funds;" and (b) could thus be a form of cyber-enabled economic warfare.

As I argued in the News and Views and reiterate here, the above pattern is an intriguing one, for it suggests that the template for such cyber-asset-seizure can be initiated with a mere allegation buttressed by a kind of prima facie evidence, allowing a government - in this case the American government - to step in and seize anyone's cyber assets, including a power foreign national. And this is where the "five-year-old" aspect of this case comes into play, for as I suggested in that News and Views, what we're looking at here is a variation on the old technique of banks using the float to make very short term investments and profits off of other people's money. The "float" is that period of financial limbo when funds from one demand account at a bank have not yet been cleared, or deposited, into another account. In effect, those funds - let us say represented by a cheque or some other financial instrument - are in a kind of limbo. As such, they can exist for a short period of time as funds available to the bank to invest for a short term trade before the transfer clears. It becomes, in effect, an asset of that bank to use as it will.  In this example, the float can be a matter of mere business days, and indeed, this is the real meaning behind the insistence of banks that funds deposited into your account(s) in the form of a check will be available after a certain number of business days. In the case of electronic deposits, that period of financial limbo can be as short as a few seconds. But in either case, the float is still there for the bank to use.

Thus, in this case we are in effect looking at a float of five years, in which case those seized assets are the seizer's to use (in this case, the US Government), while the  seizure is litigated (and, notably, presumably at the target's expense,  and litigated in an already grotesquely corrupted judicial system).  The implication here is obvious: facing a budget shortfall? Just seize some assets, and use them for whatever purpose one wishes during the period of the float, while the seized assets are in a limbo of litigation.

It does not take a German rocket scientist to see that such a system, on the face of it, is both inherently unstable and invites and enables a massive growth in corruption at the highest levels. Such practices as I have outlined in that News and Views and again in this written blog have - rest assured - already spread to other countries and to private groups that are large and powerful enough to maintain large cyber-security and cyber-warfare departments.

The basic core lesson here is simple, and goes beyond the observation that no cyber-system whatsoever is ever secure. The lesson here is that crypto-currencies are not secure, not a means of side-stepping the power of central banks, governments, and returning the money-power to the people, or protecting privacy, or any of the nonsense we heard in the heyday when crypto-currencies first emerged. The whole idea of digital money, where a central bank digital currency, or a "private" crypto-currency like Etherium or Bitcoin or whatever, is nothing but a platform to enable the more efficient theft of hard assets, and hence my sobriquet: klepto-currency.  The whole thing invites a response, and one can imagine, with time, that a country or corporation or cyber-hacking group might grow tired of trying to litigate the return of their cyber-assets, and simply decide to do their own "asset seizure" in response... and we're off and running.

And here's the kicker: it's difficult to see how any sort of global regulatory culture will "fix" the problem. On the contrary, look for it to exacerbate it.

See you on the flip side...