On Monday, the U.S. Department of Justice announced that it had recovered “millions of dollars” of cryptocurrency associated with the Colonial Pipeline cyber attack. The latest Colonial Pipeline ransom news has certainly piqued investor interest. More importantly, it also has potentially large implications for the crypto market.

Source: Shutterstock

While many are touting this as a victory for the U.S. investigators involved, it raises real concerns for crypto fanatics. It also comes at a time when President Joe Biden and other key officials are pushing for greater blockchain analysis and crypto regulation.

So what do you need to know?

In April 2021, a ransomware aware attack using a compromised password shut down operations of the Colonial Pipeline, which services much of the East Coast. Citing concerns over how long it would take to restore operations, Colonial Pipeline complied with the $4.4 million ransom demands. Investors should also note that the shutdown triggered panic-buying and temporary gas shortages in affected states.

Today, the big Colonial Pipeline ransom news is that investigators have actually recovered the funds. According to CNN, the FBI led these efforts, and will soon provide an update on its operations. CNN also notes that this is a rare outcome — many companies will never again see the ransoms they pay out.

Colonial Pipeline Ransom News: Bad Day for Bitcoin?

So how does this reflect poorly on Bitcoin?

To start, Colonial Pipeline paid out the ransom in Bitcoin, sending 75 BTC to be exact. This further validates concerns that Bitcoin is simply a tool for money laundering and other illegal activities. And, as a result of the Colonial Pipeline cyber attack, Biden has called for increased scrutiny on crypto transactions.

But beyond that, the fact that investigators were able to recover the funds is significant. According to the initial report, officials tracked the ransom to a digital wallet associated with Darkside, the group believed to be responsible for the attack. Over the last several years, exchanges have worked with governments, providing lists of individuals associated with wallets. While we do not know exactly how investigators retrieved the ransom, one possible explanation is cooperation by the involved exchange. Another is that the hacking group stashed the funds somewhere the U.S. has jurisdiction.

For true crypto fanatics, the Colonial Pipeline ransom news may be a bit jarring, as it counters the idea that the crypto market is supposed to be free from government regulation and intervention. As a result, we could see privacy cryptos like Monero (CCC:XMR-USD) and Zcash (CCC:ZEC-USD) gain for their ability to anonymize transactions on the blockchain. These cryptos have been in the spotlight in the wake of proposed crypto taxes and regulatory rumors.

On the date of publication, Sarah Smith did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.