Key insights:

• • • Geopolitical crises fuel financial volatility and illicit activity — Conflicts have traditionally accelerated capital shifts and flows, creating cover for bad actors.

    • Predictable patterns emerge — Financial institutions should watch for sudden cross-border activity, unusual cash deposits, and transactions from border areas.

    • Conflict zones enable black market expansion — They also should adapt their compliance systems to detect more sophisticated methods used by criminals, tightening screening and enhancing staff training.

While business and international politics may appear cold and calculating, these things are often driven by emotion, especially fear — and fear of instability often drives market volatility.

So it goes as the United States attacks one of the world’s largest militaries and supporters of regional terror groups, causing deepening instability in a Middle East already beset by violence. It is certain that there is already a surge of money flowing in and out of the region for different reasons. Legitimate and illegitimate actors alike will seek to both run away from the crisis and profit from it. However, there are some anti-money laundering specific thoughts that financial institutions need to consider during a time of global uncertainty.

The bottom line — lots of money is on the move. Funding will send aid groups towards the crisis; it will also send logistical supplies, war material, and other necessities. All of these cost money, and defense sectors in multiple countries will be pumping out munitions to refill stockpiles in any country that is related to or in the neighborhood of the conflict.

Not every large transaction is an unusual, reportable event, but financial institutions now need to look one or two layers below the surface. What does not seem related on the surface is always a red flag. Look at beneficial ownership of companies and vessels, look at relations of the owners, not just the Ěý(OFAC) results of those people themselves. The financial system will, and should, allow the legitimate funds to flow. However, financial investigators must remain diligent to catch bad actors that take advantage of the surge in non-profit activity or the urgency with which legitimate businesses operate in a conflict zone.

Risk Factor 1: Capital flight from regime change

Just as the fall of the Al-Assad regime in Syria caused family funds to flow to as regime members fled the country, you will see the same with politically exposed persons (PEPs) who are inevitably fleeing regime change in Iran. A political crackdown will come. Whether the victors are on the side of the West or not remains to be seen, but some factions are going to flee the country and take family wealth with them.

Banks and other financial services should watch for anyone connected to people moving money through neighboring countries in which they may have literally hiked or driven before depositing cash into a financial institution. There are stories of refugees leaving places with gold bands on their arms, cash and false bottom purses, and diamonds in the lining of sweaters. These things will be converted to cash in neighboring countries and put into financial systems less affected by the conflict. An influx of cash throughout the region, therefore, could indicate this type of capital flight.

Risk Factor 2: Illicit finance and black markets

Since the fall of Syria, we have also become aware of that helps fuel addiction and armed conflict. There are certainly other substances and drug trafficking networks about which we know very little on this side of the secrecy veil.

Therefore, this instability will be seen as a time of opportunity for criminal groups. Indeed, with Assad’s security forces no longer controlling middle eastern captagon and other narcotics trade and various armed groups looking for funding sources, this is an illicit business opportunity.

Financial institutions can expect rapid movement of money between unrelated shell corporations, new corporations, and shadow vessels. They also should expect the black market to boom with drugs, contraband Iranian oil, and funds tied to narcotics that they have only yet to discover. Illegal arms will also generate funding, so all of the methods, both formal and informal, used to transfer value will become active.

In fact, large portions of such funding will flow through financial institutions; and peer to peer payment providers, FinTechs, and money transmitters should be especially wary of funds moving rapidly through their platforms. A burst in conflict means a burst in activity from illicit sources; therefore, enhanced, targeted monitoring is a must.

How financial institutions’ risk & compliance teams should respond

First, all financial institutions’ risk & compliance departments need to assess their institutions’ OFAC and sanctions screening search parameters. This is a good time to dial up fuzzy logic capability and reduce match percentage thresholds. In other words, risk tolerance should go down while the metaphorical dragnet gets wider. Surge the department’s personnel capability to compensate if you have to, because that is better than a strict-liability OFAC fine. Remember, OFAC sanctions are closely tied to national security, especially when it comes to Iran. This is not an arena in which leniency can be expected. Compliance teams should look at monitoring systems and thresholds immediately, create geographical targeting models to cover the conflict zone, and consider a command center approach to deal with the fluidity of the situation until things settle.

If your institution has not already taken the hint from regulators, this also is an opportunity to double down on Customer Due Diligence and identity verification. Front line staff and embedded business compliance personnel should receive updated training and job aids to increase awareness and hone internal reporting. Indeed, it is an advanced business skill to understand complex corporate beneficial ownership, much less to detect when it may be tied to illicit activity or corrupt regimes. Now is the time to increase that level of knowledge and thereby make the culture of compliance more robust.

In every crisis there is opportunity as well as risk: Managing the risk allows every company to take advantage of the opportunity, shore up its mission, and strengthen the institution.

You can find out more aboutĚýthe geopolitical and economic outlook for 2026Ěýhere

Key insights:

• • • Crypto crime is likely much bigger than it appears — Blockchain forensics firms only report what they can prove with 99%-plus accuracy, meaning the true scale of crypto crime is likely far larger than official reports suggest.

    • False negatives are still a problem — While achieving incredibly low false positive rates, these strict standards result in significant false negatives, with firms missing up to 75% of known criminal addresses in tested datasets.

    • This reporting gap reveals hidden losses — FBI data shows higher losses than do forensic reports and when accounting for the 85% of fraud victims who never report crimes, actual losses could exceed $110 billion annually.

Law enforcement has known about crypto-related crime for more than 14 years now. Five years ago, I felt these industry reports left a lot to be desired. A lot has happened in since then, however, and I have learned that clarity is becoming more important than caveats, because even my own are being taken out of context by the cryptocurrency ATM industry.

The myth of “crypto crime”

Nick Furneaux points out — spoiler: it’s all just financial crime. Yet, the blockchain forensics industry still has the annual tradition of issuing crypto crime reports that end up getting reviewed . However, my previous post showed how the prevailing reports appeared to prove Nick’s point, stating that crypto crime represented just — effectively, a rounding error.

I wrote that these reports needed to be heavily caveated, as the figures identified were clearly smaller than the figures that may have been reasonably expected. In fairness to the industry, reports have since incorporated caveats on nearly all stated figures. However, this has still not stopped the industry from cherry picking figures that support the argument that there is no such thing as crypto crime.

The ironically good news in this year’s reports has been that the official figures for illicit activity across the industry has increased to of all crypto activity for the . This increase is an indicator that the industry has gotten better at identifying criminal activity; and while there is still room for improvement, we are moving in the right direction.

Art vs. science

The companies producing these reports continue to hold some of the largest datasets on crypto-crime and blockchain metadata in the world. They are ideally placed to speak to these trends in illicit activity in the crypto ecosystem. However, one of the early arguments in blockchain forensics was that it is not as effective as some people were claiming.

In the landmark case, (colloquially known as the Bitcoin Fog case), blockchain intelligence platform CipherTrace claimed that blockchain forensics was more of an art than a science. Based on evidence from Chainalysis, the case’s acknowledged blockchain forensic evidence was admissible in criminal court to based on the methods used.

Understanding the limits of these reports requires an understanding of the core audience for these forensic firms: Law enforcement, which has a high burden of proof to achieve before going to court with any evidence.

Chainalysis has been doing this for 12 years at this stage and has been one of the only services to undergo a of its data, albeit a tiny sample size of its overall dataset. In the last five years, competitor TRM Labs has become an industry leader based on its focus on blockchain intelligence and law enforcement support.

The accuracy trap

Understanding the limits of these reports requires an understanding of the core audience for Chainalysis and TRM Labs: Law enforcement, which has a high burden of proof to achieve before going to court with any evidence. As such, the standard held by industry leading companies is that a data model should achieve an accuracy level of 99%-plus. However, as with any machine learning algorithm, it is incredibly difficult to guarantee 100% accuracy. Still, 99% accuracy is higher than human-based systems are expected to have.

Despite this commitment to high standards, the blockchain forensics industry has come under fire for false negatives. In the academic research of Chainalysis’ data, researchers found its false positive rate to be 0.01%, 0.15%, and 0.11%, respectively across the three datasets, or at least 99.85% accuracy for what was in their tool. Obviously, this is much more scalable and accurate in the modern world in which criminals are using AI than having humans unravelling these datasets manually. However, this level of certainty does paradoxically result in a surprising level of false negatives.

Indeed, Alison Jimenez, of Dynamic Securities Analytics, pointed out that Chainalysis missed a significant percentage of all addresses in the three sample datasets. The study looked at coverage of three known illicit services: BestMixer, Hansa Market, and Wall Street Market.

Chainalysis was found to have been able to identify 25%, 79%, and 95% of the sampled addresses, respectively. While this may seem like the company is negligent to suggest they can identify crime when it missed 75% of Best Mixer addresses, a service designed to obfuscate the flow of funds, the reality is that identifying any of these services is pretty difficult in the first place — especially in a world in which criminals are actively trying to escape surveillance. And remember, this is just the data that made it to production; Forensics firms are still able to assist law enforcement to make informed decisions on their investigations based on a range of additional data that never gets surfaced in the tool or in reports.

The reporting gap

These forensic companies are unable to publish informed estimates of the level of crime, but they are saying that they have identified at least $154 billion dollars in illicit activity in 2025. These tools also assist law enforcement with investigations which they may not always have permission to include in their datasets. Yet, investigators can still use the technology to carry out their investigations safe in the knowledge that their evidence will be admissible in court. That means, the $154 billion figure is effectively a floor, not a ceiling for the potential effectiveness of blockchain forensics.

The FBI counts what victims report, whereas forensic firms count what they can prove on-chain. When you consider that academic research suggests 85% of fraud victims never report their crimes to anyone, the scale of the problem becomes staggering.

The discrepancy between forensic reports and law enforcement data is where the caveats become most visible. The for 2024 (released in late 2025) pegged crypto-related scam losses at $16.6 billion. This figure is 67% higher than Chainalysis’s estimate, and 55% higher than TRM Lab’s for the same category.

Why the gap? Because the FBI counts what victims report, whereas forensic firms count what they can prove on-chain. When you consider that academic research suggests 85% of fraud victims never report their crimes to anyone, the scale of the problem becomes staggering. If we extrapolate the FBI’s reported figures to account for this silent 85%, the potential loss to crypto scams could be as high as $110 billion. While not an academically rigorous calculation, this figure would not surprise many industry analysts.

What will these reports look like in another 5 years?

The critique I have of these reports is that they underestimate the size of the problem in order to be able to accurately stand by their data. This isn’t a bad thing, it just results in unfortunate outcomes. There may be a day when these reports are combined with academic research to make a more informed estimation of how big the crypto crime problem really is.

Thankfully, those in the blockchain forensics industry can’t speak in theories or artistic interpretation. They have to be able to prove their statements and back them up with verifiable data. Right now, these reports are effectively looking at the tip of the iceberg and showing what they know about what they can see — the caveat now is that this is just the known knowns. The challenge continues to be identifying the known unknowns. Fortunately, we are getting better at identifying criminal activity every year.

You can find more of our coverage of the cryptocurrency industry here

Key insights:

• • • Pushing innovation in the financial sector — The OCC is actively enabling innovation among financial service institutions, not resisting it.

• • • Regulation is being refocused, not removed — Priorities may change with each administration, but oversight remains, and crypto is increasingly central.

    • Compliance is a growth requirement — Regulations around the BSA, sanctions, and KYC still apply, so durable controls and experienced teams do matter, even with AI.

Shortly after being named Acting Director of the Comptroller of the Currency in early 2025, Rodney E.ĚýHood in the financial sector. Hood spoke about improving bank-fintech partnerships and providing regulatory frameworks for digital asset activities.

As expected, the Hon. Jonathan V. Gould was sworn in as the 32nd on July 15, 2025. Under his leadership of the Office of the Comptroller of the Currency (OCC), the spigot of technology-enabled financial innovation is set to remain wide-open, with blockchain-based products at the forefront.

In his speech to the , Comptroller Gould laid out a road map to a future that includes more de novo charters, with many of them coming from the ranks of blockchain and digital or virtual asset service providers (VASP). He refuted notions that these things cannot be done under current rules and reaffirmed the agency’s ability to regulate such institutions.

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Institutions that fail to embrace these emerging technologies as they arise risk falling behind, Gould said, describing how any legal framework that treats digital assets differently than existing electronic means is risking “a recipe for irrelevance.” Such an antiquated approach keeps companies, institutions, and indeed the nation’s entire financial system, mired in the past, he added.

Digi-mon go!

In word and deed, the current OCC continues to offer a green light to VASPs as well as to traditional financial institutions that are looking to dabble with blockchain, stablecoins, and the like. Regulatory action in the past year mostly served to end prior enforcement against traditional institutions while putting ancillary companies in check. For example, of US/Mexican border casinos, crypto ATM-style terminals, and armored car companies demonstrates the regulatory shift that takes place after each change in administration.

Government rarely gives up its authority, but it does shift the focus. Border cash is out, crypto is in. Clear regulation for this sector is important, necessary, and will continue to create an entirely new set of financial products & services.

Institutions that fail to embrace these emerging technologies as they arise risk falling behind… [and] any legal framework that treats digital assets differently than existing electronic means is risking ‘a recipe for irrelevance.’

Normally I advocate more caution but, in this case, having any regulation is better than having no regulation. Blockchain is here to stay and having any kind of clarity around it is the right way to begin. Those who legislate have an opportunity to improve the regulatory framework over this technology as it evolves — as long as a framework exists. It’s sort of like the slippery slope argument in reverse: When we build a foundation on regulations that encourage innovation while protecting consumers, including the companies themselves, we create a healthier economy. These rules can always be improved and adjusted as we understand better what we have unleashed upon the world.

Compliance is on the “can’t cut” list

Rumors are swirling of cuts to many corporate compliance budgets. Many compliance pros think this administration will let companies do as they please! Let a professional risk manager urge caution here instead. The power of the Bank Secrecy Act (BSA), the extraterritorial reach of sanctions, and the requirements to know your customers (KYC) are not going anywhere. Regulations are refocused, not removed. A proliferation of nouveau financial institutions will provide a target-rich environment for the regulators of today and tomorrow to find things they dislike and prosecute those offenses. A business that hopes to make it big should be built to withstand the winds of change and weather different regulatory conditions over time.

Therefore, smart compliance professionals will keep an eye on the horizon and keep their risk controls tight. Yes, it may be a good time to start a crypto company; but no, that does not mean you can process drug cash, ignore sanctions, or fail to collect basic personally identifying information.

With increasingly ubiquitous AI tools, your humans in the loop are more important than ever. As entry level jobs become automated, depth of experience becomes more valuable. Retain talent and institutional knowledge on your compliance teams because those individuals will train the AI as well as the investigators of tomorrow.

Indeed, no matter who is in charge of the government’s regulations, enforcement will come when you let your guard down and ignore basic risk management principles.

You can find more about how government agencies are managing various risk, fraud, and compliance issues here

Key insights:

• • • Blockchain’s transparency is a double-edged sword— While criminals use crypto for illicit activities, the permanent and public nature of the blockchain ledger creates an undeniable trail, making it a powerful tool for law enforcement to track and seize illicit funds.

    • The rise of crypto forensics— A growing industry of specialized firms and investigators is leveraging blockchain’s inherent design to unravel complex financial crimes, demonstrating that “±ô´Ç˛őłŮ” crypto funds can often be recovered.

    • An evolving battlefield— Despite the ongoing challenges posed by tools like mixers and privacy coins, blockchain technology is fundamentally shifting how financial crime is fought, turning the very system criminals exploit into the means of their capture.

Cryptocurrencies and other digital assets are used by criminals, which is great for catching them. Indeed, the biggest criticism of crypto since its inception has been its criminal use, which was estimated to be almost half of all activity by the end of 2017. In the past three months alone, asset seizures and forfeitures of more than $22 billion in crypto have been made by authorities in the United Kingdom, the United States, and their international partners.

These historic interceptions of illicit funds prove that the fundamental architecture of blockchain — the digital ledger that underpins most virtual transactions — makes it the perfect tool for catching criminals, validating the hypothesis of Satoshi Nakamoto, the presumed pseudonym of the person or persons who developed bitcoin, that fraud could be prevented through intentional system design.

While criminals assumed they could optimize their illegal activities using crypto to obfuscate fund flows, the blockchain ledger’s immutability has created a niche for financial crime investigators seeking to unravel these cases. Companies like Chainalysis, Elliptic, and TRM Labs have become synonymous with these investigations, joined by a growing network of smaller firms that are democratizing crypto investigations, combating terrorist financing and online child abuse. Ultimately working to secure seized assets and prevent further harm. By all measures, the ecosystem is expanding rapidly.

Every crypto transaction creates a permanent trail that allows investigators to catch criminals even years after their crimes. This is how, a digital exchange hack in 2016 that resulted in the theft of 120,000 Bitcoin worth $72 million (at the time) and was chronicled in the Netflix documentary was wrapped up years later with the seizure of $4.5 billion in crypto and the arrest of the two alleged perpetrators in 2022. Law enforcement may not move as fast as crypto, but if the whale is big enough, they will catch it.

Indeed, the scale of cryptocurrency-enabled crime threatens Western economic stability. The FBI received 149,686 crypto-fraud complaints in 2024, totaling $9.3 billion in losses, likely significantly lower than the true figure. More than 100,000 people are trafficked and forced to operate scams from compounds in Cambodia and Myanmar. The Prince Holding Group, a transnational criminal organization headed by Chen Zhi, generated , approximately $10.95 billion annually.

Financial crime as economic warfare

These are just headlines. Further research in the Netherlands shows that only 11.8% of fraud victims actually report being victimized. While many dismiss fraud and blame victims, crypto-related fraud is becoming economic warfare systematically draining wealth from Western economies while enslaving hundreds of thousands in forced labor camps across the Global South. With potentially $80 billion lost annually to crypto fraud, the impact extends beyond the 1.14% of the US federal budget it represents. This illicit outflow causes loss of productive capital, tax base erosion, and reduced economic activity.

Yet the technology accused of enabling this new generation of fraud simultaneously provides the tools to detect and combat these criminal organizations more successfully than any financial crime fighting technology in history. The Chen Zhi case, easily the largest asset forfeiture in US history at around $15 billion, demonstrates this perfectly.

Every crypto transaction creates a permanent trail that allows investigators to catch criminals even years after their crimes.

This is why I’ve spent the last four years studying the crypto ATM industry. While most financial crime professionals saw a problematic service in a problematic industry, I saw a massive dataset of criminal activity that could predict other illicit activity beyond crypto ATMs. This dataset helped identify terrorist financiers, vendors of child sexual abuse material (CSAM), and countless scams and frauds. Layer data-rich sources like crypto ATMs with blockchain data, and a good investigator can achieve remarkable results.

Modern blockchain analytics leverage the features Nakamoto designed for trust and verification. Immutability makes evidence tampering impossible and investigations public; and verifiability allows investigators to validate every step of a criminal’s crypto trail. Consensus mechanisms create a distributed jury of millions, validating the evidence chain further. These features enabled authorities to map the , revealing 76,000 fake social media accounts operated from facilities using 1,250 phones across 10 Cambodian compounds, and tie it to $15 billion in bitcoin.

The same technology facilitating billions of dollars in pig butchering scams annually enables law enforcement to catch the transnational criminals and recover funds. Traditional financial crimes disappear into offshore accounts and shell companies, often leaving investigators blind. However, as anyone in blockchain forensics knows, Locard’s Exchange Principle remains true: Every contact leaves a trace. Blockchain’s public ledger means every suspicious transaction leaves a permanent clue.

Nakamoto’s vision of “electronic transactions without relying on trust” inadvertently created a system for establishing criminal culpability. The blockchain’s public nature convinced criminals they could hide in plain sight, but Nakamoto saw that participants would be deterred from fraud by this transparency. The naive assumption that users had nothing to hide if doing nothing wrong quickly revealed plenty were doing wrong. Still, the system proved fit for purpose once tools were built to catch bad actors. Nakamoto’s white paper’s emphasis on preventing double-spending through public verification created a framework in which crime-spending leaves permanent evidence. All a good investigator needs is time.

The rise of crypto forensics

As crypto advances, tools like bridges, mixers, and privacy coins pose constant challenges for investigators, but claiming the money is gone when crypto is involved is simply false. As blockchain forensics advances, criminals face an uncomfortable truth: They’ve been conducting operations on a permanent, public, immutable ledger. Their only protection is time and cryptographic puzzles that an entire industry is working to unravel.

While some has been diligent in pointing out some of the challenges in the industry and some of what’s been missed, there are a lot more illicit fraud cases that never see the light of day because of what has been prevented by blockchain forensics. And while it may not be perfect, the fact that there is an industry working to build a safer financial system than what has gone before is commendable, and the accountability that public ledgers have enabled is energizing for those that must police it.

Unfortunately, the $15 billion Chen Zhi seizure isn’t the end but the beginning. With at least $64 billion stolen annually, these criminals have little incentive to stop. While some scam compounds have been dismantled, reports indicate they’re simply being relocated.

Nevertheless, blockchain is setting a new paradigm in financial crime, one in which the technology enabling crime will eventually become the weapon that defeats it.

You can learn more about financial crimes and other regulatory issues involving cryptocurrencies here

Key insights:

• • • Traditional fraud breaks systems; scams break people — Scams directed against individuals weaponize trust, urgency, and emotion and hit victims when they’re stressed or distracted.

    • Nearly 1-in-4 adults have lost money to scams, and that number is climbing — Criminals now wield deepfakes, voice cloning, and AI to make their pitches eerily convincing — and the curve is still bending in their favor.

    • By the time someone reaches the payment screen, manipulation has already won — Real protection means flagging suspicious outreach early, verifying identities in real-time, and building friction into high-risk transactions, all before emotions override logic.

One of the most fundamental distinctions in financial security is this: Every scam is a fraud, but not all fraud is a scam. During this week’s , it’s worth pausing to note what makes scams different — and why that difference matters more than ever in 2025.

Traditional fraud typically exploits weak systems, such as stolen credentials, manipulated data, or technical vulnerabilities. Scams, on the other hand, exploit something far more powerful and harder to patch — human nature itself. Scams can weaponize trust, urgency, and emotion; and when those psychological levers are pulled at just the right moment, even savvy people can find themselves wiring money to someone they’ll never see again.

The threat is only growing

The numbers tell a sobering story. More than 1-in-5 (22%) of adults report losing money to scams, according to the . And Ayelet Biger-Levin, founder ofĚýand creator of ScamRanger, a technology designed to stop scams before they happen, doesn’t mince words about the growing threat of scams: “From a numbers perspective, scams are on the rise,” she says. “They’re going to continue to rise because criminals are becoming more sophisticated, leveraging the latest technology advancements including large language models (LLMs) and AI agents to scale operations.”

Indeed, her definition cuts straight to what makes scams unique. “A scam is social engineering to convince an individual to either disclose personal information or transfer money directly to a criminal,” she explains, adding that it’s not a system breach; rather, it’s a conversation that goes wrong — often in ways the victim doesn’t realize until it’s too late.

And the trajectory isn’t encouraging. Biger-Levin says that she expects that the number of adults being victimized over the next 12 to 18 months will only increase. “In the US, I expect it to rise,” she notes. “Criminals are rapidly leveraging tools that make scams more believable such as deepfakes and voice cloning, which are used for impersonation to increase both scale and success.”

And while we haven’t reached the tipping point yet, the curve isn’t bending in our favor.

Scams adapt to every new channel we create

Here’s the uncomfortable truth: Scams aren’t a glitch in the system; rather, they’re a feature of human society that adapts with every new communication channel we build. Romance scams, investment lures, fake shopping sites, cryptocurrency schemes — these aren’t amateur operations anymore. They’re often run by organized networks, sometimes operating out of compounds in Southeast Asia, and they’re supercharged by technology that makes deception easier and more convincing than ever.

Deepfakes can put your CEO’s face on a video call. Voice cloning can mimic a family member in distress. Increasingly, agentic AI can personalize phishing at scale, crafting messages that feel eerily tailored to your life. Educating people about ways to keep from becoming victims helps, absolutely. However, when a persuasive story lands at exactly the wrong moment — when you’re stressed, distracted, or emotionally vulnerable — logic often takes a back seat.

And if those fighting fraud are waiting until a victim reaches the payment screen to intervene, they’re already too late.

Meeting manipulation where it starts

To make real progress, we need to meet manipulation at first contact — the moment persuasion begins. That means pairing human-centered design with protective technology across the entire scam lifecycle.

What does that look like in practice? It means flagging risky outreach before it reaches an inbox. Verifying websites and identities in real time, in context; and slowing down high-risk payments while prompting users with friction that feels helpful, not punitive. And critically, it means sharing signals and liability across the ecosystem — among banks, telcos, social platforms, and regulators — so they can all work from the same playbook.

The constant in all of this is human psychology. The variable is how well our systems anticipate it.

Biger-Levin says she is optimistic about enforcement improving over time. “I do predict that long-term, these scam compounds are going to be taken down,” she says, adding that she’s also realistic about what comes next. “Criminals are not going to stop there, and by using advanced technology will continue to attack individuals. The one common denominator, though, is human psychology, and that is something we can tackle and protect with the right consumer empowerment in place”

That’s the core challenge. Regulators or financial services compliance agents can shut down a scam operation, but they can’t patch human emotion. Technology solutions must be designed around how people actually think and behave under pressure — not how we wish they would. That means building systems that recognize when someone is being groomed, when urgency is being manufactured, and when trust is being weaponized.

The old advice still holds… because it reflects how we think

There’s a reason the classic warnings never go out of style. The old saying of, If something seems too good to be true, it probably is, is not outdated wisdom — it’s a reflection of how scams work by promising outsized returns, instant solutions, or emotional rewards that bypass our rational filters.

Gut checks still matter, Biger-Levin reminds us, adding that doesn’t mean we can rely on individuals to shoulder the entire burden of vigilance, especially when criminals are using industrial-grade tools to manipulate them.

Scams will always evolve. So, the question isn’t whether they’ll disappear — they won’t. The question is whether we’re willing to build systems smart enough to protect the humans inside them.

That means reducing exposure at the source, disrupting grooming tactics before they gain momentum, and making the this doesn’t feel right moment easier to spot — and safer to act on. It also means treating scam prevention not as a user education problem, but as a systems design problem.

We can bend the curve, but only if we stop treating scams as individual failures and start treating them as the systemic, technology-enabled threats they’ve become. The tools already exist; however, the challenge is coordination, accountability, and a willingness to bake protection into every layer of the digital experience.

Because the denominator isn’t changing and human psychology remains constant, the aspect that we can change is how well our systems anticipate it — and how much harder we make it for criminals to exploit it.

Staying ahead of the scammers

To stay ahead of these scammers, organizations and consumers should take practical steps to prevent and minimize risks. For example, they should stay up to date on the latest scam tactics by keeping an eye on consumer protection updates. These can help you spot red flags, such as urgent demands or unusual payment requests, that may signal a scam.

Also, when you receive unsolicited calls or emails, take a moment to verify their authenticity. Instead of responding right away, contact the organization directly using official contact information. Legitimate companies typically won’t ask for sensitive information like passwords or account details out of the blue.

Finally, boost your digital security by using strong, unique passwords and enabling two-factor authentication. Be cautious when clicking links and avoid those that seem suspicious. Scammers often rely on high-pressure tactics to prompt rushed decisions; so by taking a step back and evaluating the situation carefully, you often can avoid falling prey to their schemes.

You can find out more about how businesses and individuals are navigating fraud schemes here

Key Insights:

• • • Tokens are being more critical to security — Tokenization, especially of real-world assets like real estate, unlocks value but also invites criminal exploitation; protections and controls must be coded into protocols from the start, not bolted on later.

    • Recent collapse is a warning — The collapse of Terra, the third largest cryptocurrency ecosystem, and its Luna coin in 2022 shows how absent KYC and unsustainable yields amplify financial‑stability risks.

    • Regulators now stress risk‑based supervision — Programs must rigorously implement KYC, risk assessments, transaction monitoring, and sanctions screening. Design-thinking can translate these requirements into enforceable on‑chain controls.

Today, the digital world vibrates with excitement because of tokens, which have shown the potential to unlock value in real world assets. Tokens are digital assets built on blockchain technology, but unlike cryptocurrency, which also used blockchain, tokens are solely used for transactions or as a value currency.

In fact, tokens can represent many different types of value within the digitized world, including digital assets, ownership stakes, and even real-world assets like real estate.

In the real world, of course, buying and selling real estate requires compliance, such as anti-money laundering (AML), counter-financing of terrorism compliance, and other standards promulgated by the intergovernmental Financial Action Task Force (FATF).

With tokens, these regulations can be coded in, but will they? Take for example, due diligence, or know your customer (KYC) regulations, which require some background checking of with whom a financial institutions is doing business.

KYC is arguably the most critical aspect of overall AML compliance; yet failures in this area continue to make the news more and are often cited for being at the root of massive penalties and enforcement actions. If tokenization intends to transform the future of money, then compliance must be in the code.

The tokenization race

The race to unlock value in real-world assets and bring them onto the blockchain is only gaining momentum. Tokenization already is alluring to traditional finance and FinTech crowds alike, and its use in real estate is an easy sell. Luxury villas, coveted penthouse apartments, contemporary homes in the mountains infused with rustic accents — tokenization offers the tantalizing prospect of fractional ownership, input on property management decisions (through governance tokens), investment opportunities, or a combination of these and other options. The movement of value into tokenized real-world assets unlocks amazing opportunities for all — unfortunately, that includes criminals as well.

The criminal element has always been early adopters. In fact, much of the risk-based approach to AML compliance has evolved, in part, from that fact. Criminals exploit any security gaps and continually try novel approaches to mitigate against their risks of being detected and caught.

The initial aversion to regulation in some corners of the crypto community provided a utopia for the criminal element. Then, innovators sought to remove friction from financial services and thus oiled the gears for everyone, again, including criminals. And so, the risks continue to evolve.

Case studies for tokenized compliance

As the tokenized world is being built, efforts to bake in compliance are varied. To understand how to address compliance, consider the focus of the regulator: Their roles is to mitigate any threats to financial stability and prevent money laundering, terrorist financing, proliferation financing, and other crimes. Case studies are often used to cement lessons from compliance training, and the is an excellent reference point for anyone looking to build better tokenomics that incorporates robust compliance.

The Terra/Luna collapse and the ensuing unraveling of the Anchor Protocol, an over-collateralized Terra-based lending and borrowing system, occurred in May 2022. Regulators focused on the threat to financial stability presented by the cascading effects that de-pegged stablecoin TerraUSD that caused the value of the Luna token to free-fall. Criminals exploited the lack of compliance. The Anchor Protocol’s risks were scrutinized, and the impact of no KYC being required and unrealistic yields that gave off Ponzi vibes also were dissected. The entire episode also triggered renewed vigor in the need to develop regulatory mandates for virtual assets and stablecoins.

AML compliance may be construed as friction, but it should not. The challenge with AML compliance in tokenization only lies in the limitation of code and a true understanding of risks. Simply put, the financial utopia that tokenization can bring about will only happen if compliance is coded in up-front and not as an afterthought. Compliance as an afterthought is like baking a cake and then adding raw eggs before serving.

Managing risk continues to be an increasing challenge for traditional financial institutions and FinTech companies, and the usual compliance weak-spots — KYC, risk assessment, transaction monitoring, and sanctions screening — are already known but too often not properly addressed.

Indeed, Elisa de Anda Madrazo, FATF President, the importance of effective risk management for AML compliance, stating last year that “a significant change has also been made in separating out the assessment of the effectiveness of risk-based supervision of the financial (including virtual asset service providers) and non-financial sectors into two immediate outcomes.” This is a clear signal to regulatory authorities and virtual asset service providers alike that risk assessments, integral to the risk-based approach, must be a foundational element of operations.

Tokens of affection

In a tokenized world, real-world assets can be a darling example of FinTech and compliance symbiosis. Designing the AML compliance business requirements into code can be quite easily done if coders truly understand the desired outcomes from compliant tokenomics.

Whatever the course of action, regulatory inaction concerning virtual assets and stablecoins has evaporated and regulatory clarity continues to be enhanced. Perhaps, the next step to help tokenization gain traction is to provide regulators with true tokens of affection: Tokenization in which AML compliance is baked into protocols.

You can learn more about the challenges faced in fighting money laundering and other financial crimes here

Key insights:

• • • Blockchain data exceeds Wolfsberg expectations — Public, attribution-rich ledgers give crypto firms immediate access to behavioral, network, and cross-chain signals that traditional banks must retrofit or request from third parties.

    • Crypto companies can leverage this data — With abundant labeled history and real-time on-chain context, crypto companies can combine rules, supervised machine learning, and unsupervised discovery to identify emerging typologies faster and with clearer explainability.

    • SARs become actionable intelligence, not just checked boxes — By including wallets, hashes, and traceable flows, this data can turn SARs filings into ready-to-investigate leads for law enforcement, thereby converting compliance from a cost center to a competitive advantage.

The Wolfsberg Group’s on modernizing suspicious activity monitoring comes at a crucial time for cryptocurrency companies. Traditional financial institutions are being encouraged to go beyond basic transaction monitoring by including behavioral analysis, network effects, and various risk indicators in their anti-money laundering (AML) programs. For cryptocurrency companies, the framework describes capabilities that blockchain data infrastructure was essentially built to support.

Wolfsberg’s recommendations map almost perfectly to what blockchain businesses already are able to do. While traditional banks work to update legacy transaction monitoring systems with new capabilities, crypto companies operate in an environment in which the data for complex monitoring already exists. For crypto companies, this shouldn’t be seen as simply having to adapt to a new standard, but rather as a unique opportunity to set a new standard.

Investigation advantages built into the technology

Traditional financial investigations operate within closed systems. Investigators, at the start of an investigation, primarily have access to data points from their institution and what is available online. They may then need to gather additional information, each controlled by different institutions with their own legal requirements and timelines. The financial trail crosses multiple organizations, jurisdictions, and record-keeping systems that do not communicate with each other. With Suspicious Activity Reports (SARs) filings, investigators are often forced to close an investigation with gaps in the full picture.

Cryptocurrency investigations begin with transparency. Blockchain attribution tools offer visibility into fund flows throughout the entire ecosystem. The financial trail is recorded on a public ledger, in which tracking money doesn’t require negotiating with counterparts or waiting for legal approvals. This fundamentally changes what’s possible during an investigation. Questions that would take traditional investigators weeks to answer through formal channels or go unanswered by the time the SAR is due can be resolved in hours using attribution data and on-chain analysis.

The data available to cryptocurrency companies means they can move past compliance as a check-the-box exercise and start getting creative when thinking about what’s actually possible.

The Wolfsberg framework emphasizes “expanded risk indicator coverage” by analyzing data points beyond transaction amounts, dates, and counterparties. Blockchain companies have easy access to this data — wallet age, complete transaction history, interaction patterns with decentralized finance protocols, network connections to known bad actors, mixing service usage, cross-chain behavior, and anomalies that would be invisible in traditional banking. The data exists and is readily available for use in innovative and unique ways.

Detection models that can do more than react

Wolfsberg recommends combining three approaches: i) rules-based monitoring for known risks; ii) supervised machine learning for identifiable patterns; and iii) unsupervised methods for detecting emerging threats. Cryptocurrency companies can implement all three at the same time because the underlying data supports each approach.

Rules-based monitoring handles obvious cases such as sanctioned wallet addresses, direct transfers from darknet marketplaces, and transactions routed through high-risk jurisdictions. This represents baseline coverage that almost every crypto company will already have implemented. Adding the ability to look up scam wallets that are self-reported by victims online and community reporting capabilities in blockchain forensic tools, the foundation for much more effective risk mitigation is easily established.

Using blockchain’s historical data, models can be trained on years of confirmed criminal activity that law enforcement or blockchain tools have already identified. As traditional banks can’t access validated historical data across the entire payment ecosystem at this scale, they typically must rely on internal data and industry guidance to develop their models. Cryptocurrency companies, however, can utilize blockchain history and attribution databases that document known illicit activity. This means models can be trained on nearly unlimited applicable data from the past and can even be trained on near-real-time data as it gets added to databases.

Yet, it is with unsupervised learning that crypto companies can genuinely innovate beyond what traditional finance does by feeding attributed wallets, self-reported fraud wallets, and public blockchains directly into machine learning or AI models. With this, companies can analyze complex, interconnected patterns of activity that allow models to continuously identify emerging typologies and patterns in near real-time and potentially instantly expose gaps in a scenario’s current coverage.

It is with unsupervised learning that crypto companies can genuinely innovate beyond what traditional finance does by feeding attributed wallets, self-reported fraud wallets, and public blockchains directly into machine learning or AI models.

The data available to cryptocurrency companies means they can move past compliance as a check-the-box exercise and start getting creative when thinking about what’s actually possible.

SAR quality as intelligence product

The Wolfsberg framework addresses SAR quality directly, highlighting the problem of financial institutions filing too many low-value reports because their systems generate alerts that they cannot fully resolve. Indeed, institutions file thousands of SARs because they have unanswered questions or are unsure of exactly what is going on due to a lack of available data, not because they’ve identified actual money laundering.

Blockchain data changes what SAR filings can look like in ways that matter for law enforcement. When attribution tools indicate that funds originated from a wallet cluster associated with ransomware, were transferred through a mixing service, appeared in a customer’s deposit address, and were immediately withdrawn to a known cash-out service, the SAR can describe the exact pattern of suspicious activity with on-chain evidence for each step.

Including wallet addresses and transaction hashes in SAR narratives provides investigators with something traditional bank SARs rarely offer: immediate starting points they can follow without additional legal process, immediately making the SAR actionable intelligence.

Law enforcement agencies are overwhelmed with SARs, and it often feels like an investigator’s SAR filings don’t lead anywhere. However, when investigators can include information that helps law enforcement investigate and prosecute cases quickly and effectively, those investigators also may start seeing activity on the blockchain, such as illicit actors’ wallets slow down or funds be seized from a scammer’s wallet. This not only helps with the feedback loop but also confirms to an investigator that their work is making a real difference.

Building programs that lead instead of follow

The Wolfsberg framework also makes clear that innovation in AML isn’t optional. Criminal networks evolve too quickly for static rule sets and outdated monitoring systems. Advanced approaches need to be explainable, properly validated, and integrated into broader risk management frameworks.

Financial institutions need to build models that fully use available blockchain data, then validate them against on-chain patterns that can be directly observed. They should also train their investigators to understand blockchain attribution and network analysis — not just how to read a blockchain explorer, but how to interpret what attribution tools reveal about fund flows and network connections. When filing SARs, institutions need to include the on-chain evidence that makes their filings immediately actionable for law enforcement.

Traditional financial institutions are modernizing systems designed for the pre-internet era, while cryptocurrency companies are building compliance programs in a data-rich environment that makes certain investigations more effective than they’ve been in the past. The opportunity here isn’t just about meeting the Wolfsberg recommendations; rather the opportunity is showing what becomes possible when compliance programs are built with these capabilities from the ground up and when the data advantages inherent to blockchain technology get used to their full potential.

That will be what changes how regulators think about the industry — and what turns compliance from a cost center into a competitive advantage.

You can find more ofĚýour coverage of SARs and related effortsĚýto combat financial crimes here

3 key takeaways:

• • • The connection is detectable but required massive data analysis — IJM analyzed more than 1 million CyberTipline reports and matched them with mobile device data, ultimately linking sextortion reports to forced scamming sites in Cambodia, Myanmar, and Laos.
    • Forced scamming compounds exploit trafficking victims to commit crimes — Human trafficking victims are lured by fake job ads, then confined in guarded compounds where they’re coerced into running various online scams.
    • Coordinated multi-stakeholder action is urgently needed — Electronic service providers must improve account creation safeguards and detection methods, while law enforcement needs to better coordinate cross-border investigations.

New research by links hundreds of financially-motivated child sextortion reports to scam compounds in Cambodia, Myanmar, and Laos. Indeed, the research shows that significant effort was required to detect these linkages as IJM analyzed more than 1 million CyberTipline reports in the “Online Enticement” category from the National Center for Missing and Exploited Children (NCMEC).

“Our research provides the first clear evidence of this likely link, but to understand the true scale of the problem, there needs to be further urgent investigation into this troubling nexus by law enforcement, tech companies, and global governments,” says Eric Heintz, Senior Criminal Analyst at IJM.

Because forced scamming compounds now blend labor trafficking, high-volume online fraud, and financially-motivated child sextortion, it becomes critical that electronic service providers (ESPs) must harden account creation and improve detection of signals indicative of online fraud and sextortion. In addition, law enforcement must better coordinate their efforts at cross-border investigations and distinguish trafficked workers from criminal organizers.

Links between compound scamming and child sextortion

To illustrate the details of how these two fast-moving crime waves are converging online, forced scamming occurs when victims are trafficked into guarded compounds across Cambodia, Myanmar, and Laos, after responding to fake job-ads. These trafficked victims then are coerced into defrauding targets online as part of forced scams. These schemes employ deceit or trickery to defraud the online targets, often using scripted approaches, fake personas, or impersonation to elicit money or sensitive information.

You can read the IJM report here

The types of scams include romance, investment, crypto, fake loans, and impersonation scams, all of which are carried out from inside guarded compounds. Many times, trafficking victims endure confinement and abuse as part of being forced to perpetrate these scams on others.

These human trafficking victims are also trained on psychological manipulation tactics to lure in potential victims, including children in some instances, although it is not evident that children are being intentionally targeted.

Within some of the scam operations, if trafficking victims fail to elicit the desired outcome, such as an investment in a cryptocurrency fraud scheme, they are forced to pivot to sexualized chat and a request for images or a video call. The forced labor victims then use the collected sexual images to blackmail the scam target for money under threat of exposure. Since 2022, reports of such financially-motivated sextortion have surged globally and have disproportionately affected boys and young men, with devastating psychological harm including documented suicides.

Forced scamming is not just a fraud trend; rather, it is a human rights crisis that collides with child protection, cybercrime, and organized criminal groups across Southeast Asia and beyond.

Researchers from IJM combined large-scale ESP platform reports with mobile ad-tech telemetry to trace overlap between child sextortion and forced scamming. They analyzed nearly 1.2 million reports from NCMEC that covered 3.17 million IP addresses and paired them with more than 300 million advertiser ID rows, which included mobile devices used in these locations, the device’s latitude and longitude, and the IP address and date and timestamp (UTC) of an internet connection by the device. These were collected from 44 confirmed scam sites in Cambodia, Myanmar, and Laos, resulting in 493 reports tied to devices at 40 sites in these countries.

The strongest links centered in hotspots in Cambodia and Myanmar, and some IP addresses traced back to internet service providers in Thailand. This reflected cross-border routing and service reliance and occurred when activity originated in neighboring countries or special economic zones.

Required actions to protect children

Coordinated action by platforms and law enforcement is essential to expose, disrupt, and prosecute the intertwined machinery of forced scamming and financially-motivated child sextortion. ESPs, such as social media networks, messaging apps, email providers, cloud services, and dating platforms, submit CyberTipline Reports to NCMEC when they detect suspected child sexual exploitation. While this is helpful, more efforts are required, which include:

• • • Cross-referencing account creation and activity with known scam hotspots and scripted patterns
    • Including precise timestamps, IP addresses, and geolocation context in CyberTipline submissions
    • Flagging and disrupting account creation that originates from suspicious infrastructure, beyond simple VPN indicators

At the same time, further law enforcement action is needed to improve disruption and prosecution of these networks, including:

• • • Examining sextortion cases for signs of forced scamming, which may include scripts, crypto addresses, or investment lures
    • Studying evidence for indicators of sextortion as a tactic, such as the use of sexually explicit scripts or imagery
    • Considering that some suspects are themselves trafficked victims who have been coerced into scam operations
    • Using advertiser ID data and timestamp matching to pinpoint devices and compounds
    • Devising ways to coordinate cross-border law enforcement actions in hotspot countries, known scam regions, and local jurisdictions.

Forced scamming is not just a fraud trend; rather, it is a human rights crisis that collides with child protection, cybercrime, and organized criminal groups across Southeast Asia and beyond.

The nexus between forced scamming and financially-motivated sextortion of children is detectable — as demonstrated by IJM’s new research. Now is the time for action among ESP platforms, law enforcement, and NGOs to align data and coordinate cross-border responses to better identify devices, compounds, and networks in real time.

You can learn more about how organizations can reduce and mitigate child exploitation in the TR Institute’s human rights crime resource center

Key insights:

• • • CARF is a global initiative designed to bring tax transparency to cryptocurrency — CARF aims to prevent tax evasion by requiring crypto service providers to report customer and transaction data to tax authorities, who then share this information internationally.

    • CARF’s adoption is rapidly progressing — With widespread international buy-in, platforms are now compelled to expand their KYC standards, necessitating significant overhauls in data collection, user on-boarding, and detailed transaction categorization.

    • CARF is pushing cryptocurrency towards a more transparent, regulated, and institution-friendly future — While CARF promises to reduce fraud and harmonize rules, it could also create a split market between the regulated and the hidden, sparking ongoing debates about privacy and enforcement.

As cryptocurrencies exploded in popularity over the past few years, tax authorities around the world faced a growing problem. While they had successfully created systems to track traditional banking transactions through the , crypto transactions were happening completely outside this framework. People could buy, sell, and trade digital assets through exchanges and wallet providers without their home countries’ tax authorities knowing anything about it.

Recognizing this threat to global tax transparency, the G20 asked the Organisation for Economic Co-operation and Development (OECD) to develop a solution. The result was the Crypto-Asset Reporting Framework (CARF) — essentially a crypto version of the existing banking transparency rules.

CARF works by requiring cryptocurrency service providers, such as exchanges and wallet providers, to collect information about their customers and report their transactions to local tax authorities. These authorities then share this information with the customers’ home countries, just like they do with traditional bank account data.

The goal is simple: Prevent the crypto market from becoming a way for people to hide taxable income and transactions from their governments, preserving the progress made in global tax transparency over the past several years.

The current status of crypto-regulation

By 2025, a monumental shift had occurred in the landscape of . More than 60 nations — encompassing all G7 members and most G20 economies — formally embraced CARF, marking a palpable acceleration toward a standardized international approach. Already, 52 of these jurisdictions were diligently preparing to exchange their initial batches of data by 2027, with an additional 15 poised to follow suit in 2028.

While widespread adoption was evident, a handful of prominent crypto markets had yet to officially join the CARF agreement. Nevertheless, a clear wave of international pressure was mounting, aimed at bringing these remaining nations into compliance and thereby preventing them from inadvertently fostering illicit financial activities.

Indeed, cornerstone of CARF across these diverse jurisdictions was its commitment to consistency. Core definitions and reporting requirements were meticulously crafted to be uniform, fostering a level playing field and simplifying implementation. Any variations observed between countries primarily pertained to practicalities, such as their specific implementation timelines, the penalties associated with non-compliance, and whether domestic, non-cross-border crypto transactions would also fall under reporting mandates.

The advent of CARF fundamentally reshaped the operational paradigms for crypto platforms. The established Know Your Customer (KYC) principle for financial services regulation, traditionally focused on anti-money laundering, now expanded to encompass a new imperative: Know Your Customer’s Tax Status, with platforms mandated to report accordingly.

This profound shift necessitated a significant overhaul for many crypto businesses, as they now faced the challenge of upgrading their systems for user on-boarding and data management. This included the crucial task of collecting self-certifications of tax residency from their users and implementing novel procedures to identify the controlling individuals of any entity customers. Moreover, platforms were now required to meticulously gather detailed transaction data, carefully categorizing each entry by type, differentiating between fiat-to-crypto, crypto-to-crypto, and various forms of transfers.

What the future holds

By 2030, CARF could mark crypto’s shift into a transparent, accountable asset class. Best case, it mainstreams crypto, reduces fraud and tax evasion, and harmonizes rules across countries while allowing for further innovation. Worst case, strict enforcement drives activity underground and deepens rifts with regulators. Most likely, we land in the middle: More transparency and fewer havens that ignore CARF or similar rules.

Indeed, CARF is a major test of global crypto-governance. Its success depends on international cooperation, competent enforcement, and the industry’s ability to adapt to new transparency standards. The era of easily hiding wealth in crypto is ending, and a more accountable — and possibly more trusted — system is emerging.

CARF likely will make crypto look more like traditional finance. Clearer tax rules and reporting could draw in large institutions and more everyday users. Compliant exchanges may operate more easily across borders under a single standard, and markets in CARF countries may become more professional, with fewer anonymous users and more strong oversight.

Yet, some worry that this could cause the market to split, leaving, on one hand, a regulated, transparent side and on the other, a hidden side using privacy tools and decentralized systems. Governments will try to shrink the latter by expanding CARF and improving analytics, possibly using AI to match blockchain activity with reported data. This, of course, will spark debates about accuracy and privacy.

Rules will keep evolving, especially for decentralized finance and self-custody. We may get clearer guidance on when decentralized platforms must report; and if more activity moves peer-to-peer, some countries could require individuals to declare holdings and income directly. CARF data might also be used — carefully and with safeguards — for financial crime enforcement, which would naturally raise civil liberties concerns.

For most users, crypto may become just another taxable asset. You buy, sell, earn staking rewards, and receive tax forms or pre-filled reports. New services will emerge, such as crypto tax tools, compliance-linked insurance, and cross-border tax optimization. Privacy tech will advance too, including ways to prove compliance without revealing everything.

Today, governments expect higher tax revenue and better compliance — and strong results with CARF will attract more countries. Eventually, tax authorities will use CARF data to verify returns, send notices, and audit mismatches. For compliant users, this should be routine; and for non-compliant users, risks and costs will rise.

For more on the risks that corporate compliance professionals face in today’s turbulent environment

Further affirming this promise, Trump issued an to establish a cryptocurrency working group, which was tasked with proposing new regulations for digital assets and exploring the creation of a national cryptocurrency reserve, thereby continuing the pledge to swiftly reform the country’s cryptocurrency policy.

As a part of the new administration, Mark Uyeda, the new Acting Chair of the U.S. Securities and Exchange Commission (SEC), announced plans to to develop a comprehensive and clear regulatory framework. The primary objective of the task force will be to assist the Commission in establishing clear regulatory boundaries, providing realistic paths to registration, crafting sensible disclosure frameworks, and deploying enforcement resources judiciously. The overarching goal is to transition from what has been termed regulation by enforcement to a more structured regulatory approach.

What will be the regulatory approach?

Looking forward, it will be necessary to establish a regulatory framework for cryptocurrencies that could be similar to that of the banking industry. It is probable that the SEC, as opposed to the Commodity Futures Trading Commission, will emerge as the final regulator for this sector. Such a regulatory structure would offer the advantage of clearly defining the role and significance of cryptocurrencies both within the United States and outwardly in other global economies.

You can learn more about cryptocurrencies’ role in US financial markets in the , available on YouTube

Recently, the SEC’s Division of Enforcement’s own Crypto Assets & Cyber Unit has been rebranded as its Cyber & Emerging Technologies Unit, with the aim of this rebranding seemingly focused more on fraud and retail use. This change continues with the SEC’s overall theme of inserting regulation early in the process rather than doing so by enforcement actions.

The current administration’s dynamic stance on cryptocurrencies signals a pivotal shift in the regulatory landscape. From President Trump’s assertive moves to establish a cryptocurrency-friendly environment to the proactive measures by the SEC and the U.S. Senate Banking Committee, it is evident that cryptocurrency is poised to become a fundamental component of the financial system. However, the juxtaposition of regulatory clarity and the inherent risks of digital assets necessitates a balanced and thoughtful approach. As we advance, it is imperative to construct a robust framework that fosters innovation while safeguarding the integrity and security of the nation’s financial ecosystem.

Sen. Tim Scott (R-SC), Chairman of the Banking Committee, delivered the for the Committee’s hearing on Investigating the Real Impacts of Debanking in America. In his address, Scott emphasized that the use of cryptocurrency and other digital assets in banking is fundamental to participating in a free and fair society. This suggests an intention to limit financial institutions’ ability to de-bank or de-risk based on digital currency usage.

While this notion appears advantageous, it raises several concerns regarding the future of cryptocurrency. Additionally, there was minimal discussion on the use of cryptocurrencies in illegal activities and the associated risks. As a former chief of the SEC’s Office of Internet Enforcement once noted: “Every single crime you can conceive of is easier to do now because of crypto.” Thus, it would seem imprudent to proceed with improperly regulated cryptocurrency while simultaneously attempting to de-risk it.

Is crypto the future?

The indication is clear that decentralized finance, particularly cryptocurrencies, will be a significant trend in the future. In this context, it is essential to acknowledge that the US will play a crucial role in establishing a regulatory framework around this asset. Given the stance of the current administration, a comprehensive reassessment of the previous regime’s actions is necessary to ensure an optimal position for implementing regulations.

A hint of foreshadowing can be observed in the joint submission of — submitted by the SEC and Binance, the largest cryptocurrency exchange in terms of daily trading volume — to stay the regulator’s lawsuit against the cryptocurrency exchange. While, this joint filing references the potential influence of the recently established SEC task force, it also underscores a shift in the economic sphere, shown by the judge granting a in the lawsuit. Indeed, it is likely that there will be a change in regulation significant enough to settle this lawsuit within the 60-day stay that the court has granted.

Conclusion

It is clear that the current administration has decided to set itself apart from prior administrations in many ways, and crypto regulation is a very visible way to show the difference. Congress and the SEC along with other actors are poised to make crypto a fundamental part of the US financial system. In the not-so-distant future, the impacts of these new changes will become more apparent.

Nonetheless, the juxtaposition of regulatory clarity with the inherent risks associated with digital assets warrants a balanced and prudent approach. Moving forward, it is essential to develop a comprehensive framework that promotes innovation while ensuring the integrity and security of the financial ecosystem.

You can find more about the challenges and opportunities of cryptocurrency here