Bitcoin In Lebanon

Legal aspects
22 MAY 2014
MONA EL ACHKAR JABBOUR
PRESIDENT OF LITA
MEMBER FOUNDER OF THE PAN ARAB
OBSERVATORY FOR CYBER SECURITY
MAJ_AJ@HOTMAIL.CON

For each economy its cuurency?

Currency : evolving economic needs

Physical backup (gold, silver, bronze)

Bills (pre defined value, hold valid numbers, issued by

financial and political authority)

Our concerns
Where there is money there is crime

Information society trustful development

Legal security
Cybersecurity
More users, more attacks: Kaspersky Lab stats show a
surge in Bitcoin cybercrime 22 Apr 2014
More than 30 samples of finance-related malware were selected
Nine of them were the program designed to steal the cryptocurrency and represented a total of 29% of all financial cyber attacks
performed using malicious applications.

Bitcoin and e-money: few similarities

Bitcoin is different from e-money

regulators and policy makers have to be cautious not

to confuse the two

- both being in digital format
- e-money is a mechanism for interacting with
government-issued and regulated currencies such as
dollars and euros
Bitcoin is a virtual currency that has no fiat currency
counterpart

Bitcoin
Masterpiece of technology
Open source software
It is based on peer to peer and digital signature
Digital currency system created to facilitate internet

commerce
Replacing trust with cryptography
Distributed and de-centralized financial payment system
no transaction fees
anonymous transfer

consumers and a challenge for regulators

Price volatility, value fluctuations, which makes pricing

difficult
Security: theft of bitcoins, crash of digital currency
Lack of national control because of the nature of the
network
Irreversible transactions (protection of consumer)
Bitcoin police (self regulation)
Sovereingty

Legal status
Gray region

Is it lawful to create private currency

Government responsible for coining money and

regulating the value

Criminal sanctions

Bitcoin and the traditional legal framework

rooted in a philosophy of freedom, bitcoins use

raises a range of civil liberties issues such as:

consumer protection
cyber crime
privacy

Innovative development raising legal and regulatory

issues

- finding acceptable methods for authentication

- protecting information and privacy
- accomodating special needs of law enforcement
- creating the requisite means of settling disputes

Exploiting lack of security

a way to steal Bitcoin is to directly attack users exploiting lack of

security in their systems and in many cases the total absence of

defenses to secure digital wallets.
The simplest way is to steal/discover its password;
the attack against Mt. Gox was possible due hacking that exposed the

list of user accounts and password hashes.

The knowledge of the password allows the hackers to compromise the

encrypted users wallet.

The wallet encryption doesnt represent a great protection against

hacking attacks ( host compromised by malware, or if malicious code

is able to sniff the passphrase using, for example, a keylogger)

Threats to the user

Criminals can conduct cyber-attacks to steal Bitcoins

from the victims wallet. They can adopt various

techniques, such as use of malware to steal a digital
wallet or social engineering attacks, to gather
information on Bitcoin users funds.

Another way to monetize the interest in the virtual coin

is the abuse of computational resources of victims. This

is by cyber-criminals using a botnet composed of a large
number of machines infected with malware equipped
with a miner module.

Speculation
A way to get a profit by Bitcoin is speculating on the

value of the Bitcoins.

Legal activity but the virtual currencies schema suffers
oscillations related to incidents such as a cyber-attack
(e.g. DDoS or a Data Breach)
a fall in the trust in the digital coin
. An ill-intentioned hacker could conduct cyber-attacks
against principal exchange services to influence the
global level of trust in the currency and consequently its
value. In this way, the criminals could acquire or sell
huge volumes of the currency, making great profits.

Theft of Bitcoin: bank robbery

The problem of theft of Bitcoin is exactly the same for any other

currency: different techniques

Theft of Bitcoin can be perpetrated by cyber-criminals to make:

- a direct profit
- attack the virtual currency scheme itself
- speculation purposes
- affect the level of trust on the currency

The principal methods to steal Bitcoins are :

- hacking techniques and malware-based attacks

Bank robbery!
in 2012 a group of hackers exploited a vulnerability in the

cloud services provider, Linode, that gave them the access to

users digital wallets (46,703 BTC for a total amount of
$228,000).
The victims were mainly users of trading platforms such as
Bitcoinica (around 43,000 BTC) and private users.
the attackers compromised a customer service portal to

target wallets stored on Linode servers. It is considered the

equivalent of a bank robbery. According to the official
statement released by Linode after the attacks:

Event reported by Mt. Gox

In June 2011, one of the principal Bitcoin exchanges

was victim of a memorable attack that obtained 6%

of all the virtual currency in circulation at that time

(around 400,000 Bitcoins for a total amount of $9 million)

478 accounts have been deprived of 25,000 Bitcoin transferred
on th largest currency exchange.

users

2014 A massive cyber attack f-distributed denial of

service- from unknown sources that has been

spamming bitcoin exchanges involved thousands of
phantom transactions, forcing at least three of the
online platforms that store bitcoins and trade them for
traditional currencies to shut down
Canadian Flexcoin bank has collapsed after a virtual
bank robbery
sharing the recent fate of Japans Mt Gox exchange.

Currency Dimensions
Use

Organization of values
Sovereighnty of nation states
People wellfare

Stability of economy and relation

 how can these traditional law apply to bitcoin?

Who is concerned?
Who use it?
In the beginning, (hobbyists and mathematicians.
Actually, ordinary people (for legal purchase, no

legal byrden)
ordinary users, miners, and exchanges
And
People seeking to protect privacy
cyber criminals and terrorists

Miners : are they transmitters?

The second category of Bitcoin users
participate in Bitcoin's distributed transaction-clearing process
Compete for the free bitcoins that are awarded at random to one
miner every 10 minutes

Exchangers
exchange firms help users convert between bitcoins and

traditional currencies.
These companies qualify as money-transmitting
businesses and are therefore subject to applicable
regulations
Bitcoin exchanges need to register as moneytransmitting services with the relevant state or federal
authorities and comply with regulations governing
money-transmitting services
That may not be easy
leading Bitcoin exchange, Mt.Gox, is currently located in
Japan

Iowa State HackedTo Mine Bitcoins

2014- the university identified several separate

servers that were involved in the attack and said that

they were compromised specifically to mine Bitcoins.

Money laundering

Forcing the Bitcoin network to comply with local

laws are likely to fail

Outlawing the cryptocurrency or shutting down
networks wont work

It will continue to operate in other jurisdictions

difficult to unmask the parties to transactions within the
Bitcoin economy

complete ban would be a waste of time

Problems
Counterfeiting
(in the context of digital money its the double spending
problem)
Bitcoins solution: use of blockchain

The cost of trust: Regulating and transferring

Stable economic growth

Redistribute wealth
Reduce unemployment
Finance deficit

Minimizing the risks (threat of frauds)

trusted third parties
Central banks
Financial intermediaries

No official backing
Based entirely on faith

Similar to fiat currency

Spent wherever a merchant accepts them
Costs of doing business is reduced

Small value transactions are possible

No payment reversal

 Few merchants accept bitcoin

NGO accept donation (wikileaks)

Hacker group Lulz security
Bitcoin exchange (conversion of bitcoins to fiat

currencies)

Some nation reaction

bitcoin is evolving from an amateur hobby to the

realm of professional finance

bitcoin was appealing to criminals and could do
damage to the U.S. economy
China and Thailand have banned the money
Americans May be left holding the bag on a
valueless currency.?

Money in legal frameworks

Some legal insights and concerns

Liability of users

Liability of service provider

Enhanced self protection
User considered as professional

Support risks and losses

Backing criminal activities?

Money laundering

Tax evasion
Sale of stolen credit cards
Funding of online gambling (in jurisdiction where it

is prohibited)
Purchase pf drugs online (silk road marketplace=
TOR. It accepts only bitcoins

 Thanks for your attention