In this episode of Unchained Premium, cybersecurity expert and former Director of Cybersecurity and Secure Digital Innovation at the National Security Council, Carole House, shared her thoughts on ransomware, the evolution of cryptocurrency, and the regulatory landscape of decentralized technologies.
Known for her prowess in cybersecurity, she has been entrusted with roles that demanded her to safeguard national security in the digital realm. Her work, undoubtedly challenging, was described by herself as “the coolest job in the world,” a testament to the importance and intriguing nature of her field.
Ransomware: A Growing Threat to Critical Infrastructure?
House highlighted the disruptive impact of ransomware on critical infrastructure. “Ransomware attacks have evolved drastically over time.” Initially, they were seen as a nuisance disrupting individual systems. Today, they pose a significant threat to critical infrastructure, with the potential to disrupt entire communities or even countries.
Crypto: A Double-Edged Sword?
House shed light on the complex role crypto plays in the world of cybercrime. Despite its potential benefits, she emphasized the critical need for implementing stronger controls to curb malicious activities.
“Cryptocurrency enabled the rise of this sophisticated economy,” House explained, “not because the tech is inherently evil, but because of the absence of sufficiently built-in controls.” She elaborated that the absence of strict anti-money laundering (AML) and Know Your Customer (KYC) requirements in the cryptocurrency space contributed to the rise of a sophisticated economy for cybercriminal activities.
While the lack of regulation has created opportunities for illicit activities, House also emphasized the potential advantages of public ledgers. The transparent nature of crypto transactions allows for unprecedented visibility, a feature absent in traditional banking systems.
Despite the challenges, House remains optimistic about crypto’s potential role in enhancing cybersecurity. She emphasized that a nuanced understanding of the technology and its vulnerabilities could lead to building the right controls to prevent criminals from using the ecosystem unchecked.
To combat the illicit use of cryptocurrencies, House highlighted the importance of international cooperation and the implementation of global standards. As part of the White House’s counter-ransomware initiative, over 30 nations and the European Union are working to curb the misuse of crypto. “There are benefits to leveraging the good kind of information and visibility that’s available with most of these assets,” she said.
A Balanced View on Innovation
House also shed some light on the heated debate about regulation, and whether it’s pushing innovation outside the United States. She said, “the technology is a technology… just like any other technology. It really all depends on the design. There’s nothing inherent about the technology that prevents it from meeting all of the policy objectives that regulators have.” While pointing out the need for adequate controls, she underscored the economic benefits and the potential for innovation that crypto holds within the U.S.
This holistic view sees the technology as neutral, with challenges arising not from the technology itself, but due to a lack of appropriate regulations and controls.
The Regulatory Landscape of Decentralized Finance
Decentralized Finance (DeFi) brings about unique regulatory challenges. House notes that the direction that DeFi is going could present a “great national security threat… if there is not hand in hand a market evolution towards building in controls into these platforms.”
She acknowledges the privacy-enhancing innovations in the space, such as homomorphic encryption and zero-knowledge proofs. However, House warns that without built-in governance mechanisms for appropriate discoverability, the sector could become a “highly obfuscated and disintermediated system,” which would require regulation to adapt and move controls elsewhere.
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