Crypto's Value Is Not Relevant To Investigators, Criminals Are

The UN estimates $2 trillion annually is involved in money laundering, and a small but significant percentage is done with crypto. Despite the crypto winter, investigators have cases involving crypto. With the right tools and training, investigators can close more cases, faster.

The market capitalization of cryptocurrencies peaked last year. Recently, the value of cryptocurrencies may have waned again, but this is no longer proportional to their appeal to both legitimate users and wrongdoers.

Perpetrators of various types of crime, such as money launderers and drug dealers, used Bitcoin to move huge sums of money without depending on banks or other intermediaries to execute transactions. Sponsored by dark web markets, this has allowed illicit activities to proceed daily without compromising the identity of the bad actors.

In truth, crypto’s value is irrelevant to criminals. They will continue to use crypto as a medium for transactions in money laundering, drug, and weapon trafficking, terrorist financing, and fraud, without risking their personal identity being exposed through bank transactions.

Banks are highly regulated institutions that are bound to identify their clients using proper documentation and KYC procedures. Despite the fact that cryptocurrency transactions are displayed on a public ledger, the identity of the malodours remains uncompromised.

Law enforcement will find themselves involved in small- and large-scale cases where digital assets are an essential part of the investigation.

So what’s being done? What needs to happen?

The U.S. Office of Foreign Assets Control (OFAC) cracked down on several cryptocurrency business entities in 2022, including the infamous Tornado Cash digital assets tumbler. Tornado Cash is an open-source decentralized digital assets mixer. It combines "tainted" bitcoin money with others to hide its origins and obfuscate the trace. The OFAC undoubtedly will involve law enforcement agencies in the closing of similar cases.

New altcoins emerged and introduced innovative developments to the crypto industry and global finance. Together with multibillion-dollar crypto-native businesses, they incentivized the adoption of cryptocurrency and new regulations to support its advantages over the criminal element.

Investigators need to know what information to gather and what questions to ask to enforce the new laws, i.e. how do criminals use crypto to launder money? What new methods emerge with this new ecosystem?  Effective questions will require crypto knowledge and an understanding of how crypto can be used in crime.

Personnel readiness is not the only challenge for which law enforcement must prepare. Crypto introduces astounding speed to global finance. In fractions of a second, criminals use it to move large amounts of money across international borders.

Additionally, investigators need capable tools that match the speed of cryptocurrency and criminals to stay ahead of their case. Funding may undermine the effectiveness of law enforcement agencies.

On a separate note, if the United States asserts jurisdiction over cryptocurrencies and digital assets, law enforcement officials must anticipate new expectations and levels of demand from regulators and crime victims.