Cryptoassets, particularly cryptocurrencies and nonfungible tokens, which are underwritten by distributed ledger technology, have become an increasing focus of financial institutions, investors, government regulators, and criminal actors. Colloquially known as “crypto,” cryptoassets represent a small proportion of value in financial systems around the world. Nonetheless, cryptoassets represent a potentially disruptive force and are, in their own right, a financial ecosystem. Cryptocurrency, specifically, has a variety of properties that are appealing to both licit and illicit actors: It is, generally, pseudonymous and irrevocable, and its transactions do not necessarily require a third party. Despite these features, the value of cryptocurrency has been volatile, and even though one, bitcoin, has been adopted as legal tender in two countries, cryptocurrency has not replaced fiat currency or become part of most people’s financial experiences.
Crime related to cryptocurrency has increased with its proliferation and appreciation, with victims’ losses being in the tens of billions and increasing on an annual basis. Cybercriminals steal both cryptocurrency outright and the resources to “mine” it. Extortionists, such as ransomware operators and online blackmailers, may request cryptocurrency for payment, since cryptocurrency can be difficult to trace. Fraudsters defraud people by taking advantage of low-information environments, increasing interest in cryptocurrency, and consumers’ fear of missing out on the “next big thing.” These frauds include misinformation campaigns that convince investors to buy into bogus projects, the manipulation of cryptocurrency and nonfungible token projects, and the mimicking of legitimate projects to convince people to send their investments to scammers and not to legitimate technologists’ accounts.
As the losses related to, and volume of, cryptocurrency and victimization in cryptoasset-related crime have increased, so too has the attention that governments pay to cryptoassets and cryptoasset service providers (CASPs). However, regulating cryptoassets is difficult, but not impossible, although decentralized finance presents its own challenges. Most cryptocurrency users make use of centralized CASPs. Moreover, the Financial Stability Board and the Financial Action Task Force have issued guidance regarding the regulation of cryptocurrency and cryptoassets. Uptake of these suggestions has been uneven but is increasing. Even so, capacity to investigate crimes and cryptocurrency is limited; however, there is broad recognition that governments must develop public–private partnerships to approach a semblance of oversight.
