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In this photo illustration, a visual representation of the digital Cryptocurrency, Bitcoin is displayed on April 03, 2019 in Paris, France. Chesnot | Getty Images

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Background: Recent investigations and reports reveal the myriad problems related to the use of cryptocurrency, especially related to its possible criminal use cases. Regulators are particularly concerned about cryptocurrencies and their facilitation of money laundering, which is carried out via the dark web and complex exchange services.

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  • Cryptocurrencies’ decentralized nature and high anonymity now act as pathway for criminals to steal and launder money.

    • In 2019, 2 men were convicted in New York for laundering around $2.8 million in cryptocurrency and Western Union payments.

    • In 2021, CNBC reported that a man in Ohio was charged with laundering over $300 million using Bitcoin.

  • Thus, more people are calling for regulations and cooperation from various cryptocurrency companies to help the government prohibit such illegal acts.

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Initial Coin Offerings: Many frauds and scams are constantly reported during Initial Coin Offerings (ICO), when a new cryptocurrency is launched and sold to investors.

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  • ICOs, first introduced in July 2013, were primarily intended for businesses to raise capital for their cryptocurrency products and companies. Since then, however, many fraudulent activities have been identified.

  • A recent Investopedia report suggests that 80% of the ICOs are fraudulent. The problems occur during the payment stage, where customers send bitcoin payments and are not granted access to the product.

  • ICOs are not regulated, and the basic verification processes for issuing companies do not take place.

    • According to Bond University, in April 2018, over 600 million US dollars were identified to be lost to ICO fraud schemes for the iFan and Pincoin cryptocurrencies in Vietnam.

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Why you should care:

  • Cryptocurrency is a newly emerging method for payment in the 21st century. The technology has various promising applications, but without the proper regulations, you may become the next victim of crypto fraud.

  • There are also concerns that Russian oligarchs are currently using cryptocurrencies to evade Western sanctions, demonstrating the need for better government oversight.

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