Cryptocurrencies such as bitcoin continue to grow in profile as a method of paying for goods and services in the next generation of the Internet, Web3. But as more money is pumped into hitherto loosely regulated currencies, there is also increasing government scrutiny.
On February 17, the US Department of Justice announced that it was launching a national cryptocurrency enforcement team designed to monitor blockchain, the underlying technology behind cryptocurrencies, for any wrongfully earned profits. It will work with a variety of groups, including the FBI's newly launched Virtual Asset Exploitation Unit, which also focuses on cryptocurrencies.
With the rapid innovation of digital assets and distributed ledger technologies, we have seen an increase in their illegal use by criminals who exploit them to promote cyberattacks and ransomware and extortion schemes; narcotics, hacking tools and illegal restricted online traffic; committing piracy and scams; and laundering the proceeds of their crimes, Kenneth Polite Jr. at the US Department of Justice said in a statement.
The news comes weeks after the Justice Department accused a couple of legalizing $4.5 billion worth of bitcoin – and just after the UK tax authority, HMRC, announced the first seizure of non-fungible tokens (NFTs), a Digital asset that is paid for with cryptocurrencies. In January, a New Scientist investigation revealed that UK police forces have confiscated £300 million in bitcoin over the past five years. Taken together, this adds up to a cryptocurrency crackdown. This is excellent news for anyone who has been observing space for a long time, and is long overdue. Frauds have always happened in crypto, but I think there is growing concern about the scale of some frauds. While the technology has many legitimate uses, cryptocurrencies are also used for money laundering. 29 Unregulated Cryptocurrencies A recent analysis of exchanges where people can trade currencies found that up to 70 percent of cryptocurrency trades were "wash trading" – where an investor sells and buys the same asset to create an artificial interest in the investment, often distorting the value. That research studied exchanges as far back as 2019. A more recent analysis, by blockchain data platform Catalysis, estimates that at least $25 billion worth of cryptocurrency is held in illicit sources on exchanges. Money laundering is estimated to be between $800 billion and $2 trillion a year.
At the same time, cryptocurrencies have broken out of something seen as a more mainstream investment than an online space. On February 13, major cryptocurrency exchanges ran ads featuring Hollywood stars during the Super Bowl, one of the world's most-watched sporting events, which was watched by 112 million people.
While cryptocurrency exchanges are legitimate businesses, the increased prominence of the technology makes it easier for people to fall prey to illegitimate scams.“Cryptocurrency scams and other crimes are affecting more and more people in different ways,” says Matthew Shinto at the University of Liverpool, UK. In May 2021, the US Federal Trade Commission (FTC) said it saw a 12-fold increase in the number of reported cryptocurrency scams and a 1000 percent increase in value compared to a year earlier. The FTC said the amount of scams increased significantly throughout 2020 and 2021
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