While most of the mainstream media has been ignoring the story, you can always count on alternative news to serve up some disconcerting information about governments using consumer electronics to spy on their citizens. Now, RT reports that not only can the government monitor everything we do, everywhere we go, but now they can take full control of our mobile phones and gain access to sensitive information including your digital wallet.

‘Legal malware’

The Italian firm “Hacking Team” has developed what is being dubbed ‘legal malware’ that can take total control of your cellphone. The RT report was based on a statement released by the Russian computer security firm Kaspersky, producers of one of the world's most highly regarded consumer security products. The Kaspersky lab working closely with the University of Toronto's Citizen Lab not only uncovered the breech but was able to obtain the actual user manual for the hacking app as well. Kaspersky researcher Sergey Golovanov commented on the application itself:

“Our latest research has identified mobile modules that work on all well-known mobile platforms, including as Android and iOS. These modules are installed using infectors – special executables for either Windows or Macs that run on already infected computers. They translate into complete control over the environment in and near a victim’s computer. Secretly activating the microphone and taking regular camera shots provides constant surveillance of the target – which is much more powerful than traditional cloak and dagger operations.”

But the problem goes much deeper than simply opening a microphone or taking pictures. The Milan-based company, which opened for business in 2001, said that the software has the ability to “take control of your targets and monitor them regardless of encryption and mobility,” while at the same time “keeping an eye on all your targets and manage them remotely, all from a single screen.”

While hacking cellphones is not a new idea, using Remote Control System (RCS) malware for mobile phones was previously unknown until now. The malware itself is extremely hard for even the best anti-virus software to spot let alone eliminate because it uses different obfuscating tactics to cloak its presence in the system and even “scouts” a potential target for installing into the system.

It is now possible for police, or anyone else with access to the software, to install it either directly on the targets cellphone (assuming access) or installing it on a computer that the phone will connect too. The application can also be hidden in various fake applications that the victim can be lured into downloading.

Are Bitcoins at risk?

The question is how this affects Bitcoin security, both in our mobile and desktop wallets. According to Kaspersky once the malware has been installed on an iPhone for instance, it can activate email, SMS, MMS, voice recordings, GPS/GPRS, Wi-Fi, listing files, cookies, cached web pages, address book, call history, notes, calender, clipboard, full app list, SIM changes, support chats, Skype, Viber and WhatsApp. Enough information can easily be collected with this much access to quickly empty a Bitcoin wallet.

The company, now with more than 50 employees, claims that the malware was designed strictly for law enforcement and the military and that they do not sell it to countries blacklisted by NATO as repressive but there has been at least one report that indicated that these apps have already been used by Saudi Arabia, Turkey, and Morocco and it is almost guaranteed that criminals will eventually get copies. Another concern revolves around the government being able to monitor your transactions, a feature that Bitcoin was designed to prevent.

The report completed by Citizens was especially caustic about the particularly invasive nature of this tool:

“This type of exceptionally invasive toolkit, once a costly boutique capability deployed by intelligence communities and militaries, is now available to all but a handful of governments. An unstated assumption is that customers that can pay for these tools will use them correctly, and primarily for strictly overseen, legal purposes. As our research has shown, however, by dramatically lowering the entry cost on invasive and hard-to-trace monitoring, the equipment lowers the cost of targeting political threats for those with access to Hacking Team and Gamma Group toolkits.”

So far Kaspersky has found more than 350 infected servers scattered in 40 different countries and the United States led the field with 61 infected servers and many more were found in servers as far apart as the UK, Kazakhstan and Ecuador.