Crypto transactions remain a major concern for world governments due to their implicit role in money laundering activities
By Kiran N. Kumar
Recently, the Department of Justice (DOJ) announced that the Federal Bureau of Investigation (FBI) is forming a skilled team to tackle growing cryptocurrency crimes, especially during the Covid pandemic.
“People of all ages, including the elderly, are being victimised by criminals through cryptocurrency-related fraud schemes. Developments in cryptocurrency technology and an increasing number of businesses accepting it as payment have driven the growing popularity and accessibility of cryptocurrency,” the FBI said.
The federal agency became active after it found North Korean hacker group Lazarus behind stealing $625 million in cryptocurrency from the Ronin Network, owned by developer group Sky Mavis. Crypto crimes have been making headlines and the FBI’s Most Wanted List includes Crypto Queen Ruja Igalatova who is on the run.
The year 2021 saw a dramatic rise in cryptocurrency crimes forcing the governments to ponder a framework to regulate the crypto market capitalization of about $3 trillion – with daily traded volumes ranging at about $275 billion spread over 400 exchanges last year.
In fact, a study of 216 crypto exchanges worldwide by London regtech company Coinfirm found that 14% of them are licensed by regulators.
Another finding revealed that “69% of exchanges do not have complete and transparent customer due diligence (CDD) and Know Your Customer (KYC) procedures, while only 26% introduced anti-money-laundering (AML) procedures such as monitoring transactions or recruiting a money laundering officer.”
A proposal paper of the European Commission (EC) titled, the Markets in Crypto Assets (MiCA), outlined the Commission’s plan to make Europe fit for the digital age and to provide consumer and investor protection and market integrity. Under Article 76 of the proposal, it defined various market abuse rules and asked crypto-asset service providers to keep vigil on potential market abuse.
Even US officials, SEC Commissioner Hester Peirce and CFTC Commissioner Dawn Stump have explicitly announced at a global conference the plans to adopt a similar surveillance mechanism.
Even Hong Kong that allowed crypto exchanges liberally and Singapore which has temporarily permitted them to operate under the Payment Services Act, are keen to introduce surveillance as top priority.
Monitoring crypto transactions
Apt for the timing, Coinbase announced early this week that it sold an analytics software license to the US Immigration and Customs Enforcement (ICE) for $29,000 in August 2021, followed by a software purchase potentially worth $1.36 million the next month.
ICE is a division of the US Department of Homeland Security and also looks into “broader transnational crimes as well, including various forms of financial offenses.” These tools help the US agency to help it track transactions across Bitcoin, Ether and other cryptocurrencies.
“ICE now has access to a variety of forensic features provided through Coinbase Tracer, the company’s intelligence-gathering tool (formerly known as Coinbase Analytics),” the report said.
Many government agencies will soon opt for tracking software to keep a tab on crypto transactions, which remain a major concern for the world governments due to their implicit role in money laundering activities.