Crypto Crime Took a Hit in October Causing Only $32 Million in Losses

Lack of Oversight Helps Criminals

Although crypto crime is typically associated with thefts of tokens from individuals and businesses, criminals are also starting to use cryptocurrency to fund illicit activities and sell illegal items. The decentralized nature of blockchain makes cross-border transactions nearly impossible to trace for law enforcement. Organized crime uses cryptocurrencies as an alternative to the banking system to hide their activities and move monetary value without oversight.

Cybercriminals have found tokens very practical for ransomware activities and other types of scams. One reason for the flourishing of illicit activities is the lack of oversight and regulation.

Many countries are playing catchup with the booming blockchain industry, working on adopting legal frameworks, not only to regulate the industry but also to protect individuals and businesses.

One good example is the US, where oversight is divided between multiple agencies such as  IRS, SEC, CFTC, and FinCEN, leading to issues in stopping money laundering and sophisticated crypto fraud and money laundering. However, the U.S. government has started to be more assertive by imposing sanctions on individuals and entities and formulating new laws and strategies to combat the issue.

The Private Sector Is Stepping Up

Historically, most of the crime was a result of hacks, and this is how typically crypto crime is perceived. But old-fashioned Ponzi schemes are still in vogue. Some of the biggest frauds in the industry have been committed by companies that appear to be legitimate. Crypto scams have resulted in investors losing $20 billion over the previous 5 years, not including 2023. And from a statistical perspective, the volume of crypto funds stolen in 2022 rose by 7% compared to 2021.

The private sector is attempting to curtail criminal activities with more strict KYC inspection and encryption systems. Companies are becoming proactive by identifying and fixing vulnerabilities. It’s not the Wild West yet, but bandits are lurking in the crypto scene, ready to exploit any weakness in a system and take advantage of investors’ eagerness to join the hype. Vigilance and proactive measures are required to thrive in the emerging realm of blockchain.