Regardless of your position on whether cryptocurrency is a legitimate method of payment, you can’t deny its permeation into mainstream society recently. From donations to Ottawa “freedom” protests[1] to countries approving bitcoin as legal tender,[2] the use of cryptocurrency is emerging beyond the dark web.
But with use comes misuse. In 2021, there were an estimated $3.2 billion USD in illicit cryptocurrency transactions – a five-fold increase from 2020.[3] The response? Greater enforcement against criminal misuse of cryptocurrency by governments across the globe. The days of the “Wild West” are coming to an end.
Criminal misuses of cryptocurrency are three-fold:
- It is used to commit crimes or support illicit activities, such as buying illegal goods and services online, ransomware payments, or supporting terrorist activities;
- Cryptocurrency is used to obscure financial activity, such as in money laundering or tax evasion schemes; and
- Marketplace crimes, such as stealing cryptocurrency through hacking wallets and exchanges, or market manipulation.
Government responses have varied. Some countries – notably China – have banned cryptocurrency transactions outright.[4] The United States has ramped up enforcement action, as the value of its cryptocurrency market has increased from a market cap of $14 billion USD in 2016 to over $3 trillion USD in 2021.[5] For example, in October 2021 the Department of Justice launched the National Cryptocurrency Enforcement Team, “to tackle complex investigations and prosecutions of criminal misuses of cryptocurrency.” Its members include prosecutors with expertise in cryptocurrency, cybercrime, money laundering and forfeiture. And on May 3, the SEC announced it was adding 20 new positions to its Crypto Assets and Cyber Unit. That unit will now have 50 employees focusing on securities law violations relating to digital assets.
In Canada, the RCMP has been improving its digital currency tracing technology to fight the rapid growth of bitcoin investment scams, fraud and theft, while the regulators are adapting existing legal frameworks – such as securities legislation – to address illicit uses of cryptocurrency.
Regardless of approach, stricter regulation and enforcement action against criminal misuse of cryptocurrency is a trend to watch.
[1] Crypto connected to trucker protest seized by police, fundraiser says in court documents | Financial Post
[2] In Global First, El Salvador Adopts Bitcoin as Currency – The New York Times (nytimes.com); Bitcoin becomes official currency in Central African Republic – BBC News
[3] Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time High in Value, All-Time Low in Share of All Cryptocurrency Activity – Chainalysis
[4] Crypto is fully banned in China and 8 other countries
[5] FACT SHEET: President Biden to Sign Executive Order on Ensuring Responsible Development of Digital Assets | The White House
