According to analyst firm CipherTrace, an increase in fraud in the cryptocurrency industry is «inevitable» as digital assets spread around the world.
The chief financial analyst at CipherTrace, John Jeffries, gave an interview to reporters the day before, in which he described the options for the likely development of events in the fight against illegal financial flows in cryptocurrencies. Let’s talk about the situation in more detail.
First, let’s explain the situation. Scammers in the cryptocurrency industry are not uncommon. They take advantage of the decentralized nature of blockchain assets, which eliminates the possibility of blocking a single address on the network. Accordingly, even if a criminal steals a certain amount, these coins will remain at his address, and no one can do anything about it. The only exceptions are cryptocurrency exchanges, which can freeze the account of fraudsters if their merits are proven.
There are many methods of stealing funds. This can be either ordinary malware that sends coins to the desired address, or banal promises to «double» the amount of cryptocurrency sent to the fraudsters’ wallet. In the end, it all comes down to getting someone else’s cryptocurrency, covering up your tracks and then withdrawing the coins into cash.
According to some experts, the scale of hacker activity will only grow in the future.
Scammers in the cryptocurrency industry
Here is Jeffreys’ point of view, who predicts the rise of criminals The expert’s reply is given by Decrypt.
As the cryptocurrency ecosystem grows, the illegal use of funds inevitably expands. The growing interest in cryptocurrency creates the potential for money laundering and tax evasion.
It is noteworthy that Jeffries’ comment goes against the recent statement of the former CIA chief Michael Morell. Recall that a few days ago Morell said that it is not profitable for fraudsters to use BTC, since the blockchain of the cryptocurrency is public and makes it an excellent tool for spying on intruders.
Taking this into account, any representatives of law enforcement agencies can trace the chain of movement of funds and, if desired, draw up a diagram of them. Naturally, such a prospect of fraudsters is not encouraging, because their main goal after stealing money is to cover their tracks and remain undetected.
Morella’s comments were supported by Martha Belcher, special advisor to the nonprofit human rights organization Electronic Frontier Foundation. Here is a quote from an analyst.
It’s great that intelligence officials are repeating an old fact that the crypto community has long noted. Criminals have been using cash to finance illegal activities for a very long time, but we are not calling for a ban on cash.
Morell cites a recent study by market research firm Chainalysis that found that only 1 percent of all cryptocurrency activity between 2017 and 2020 is related to illegal activity. But in cash, the volume of illegal financial flows allegedly reaches the level of 4 percent of world GDP.
However, Maddie Kennedy, senior director of public affairs at Chainalysis, noted that the firm’s ratings for illegal activities involving cryptocurrencies could rise as data collection methods improve. That is, allegedly now many illegal transfers simply pass “past the radars” of law enforcement agencies, which cannot even identify them.
Kennedy also added that while the percentage of criminal activity involving cryptocurrencies has declined recently, this is partly due to the overall increase in activity in the industry.
One of the reasons the percentage of criminal activity has dropped is that the total economic activity in the crypto has almost tripled between 2019 and 2020.
This means that the volume of all operations has increased significantly, as a result of which the share of criminals’ activity went down. And it sounds logical.
One way or another, Bitcoin really remains a rather “inconvenient” medium for illegal financial transfers. It is much more profitable for fraudsters to use anonymous cryptocurrencies like Monero, where their transactions are hidden from prying eyes. At the same time, last year, the US Internal Revenue Service began to make efforts to «hack the privacy» of Monero in order to close this loophole for criminals.
We believe that there will be no way to deal with scammers in the cryptocurrency industry. Still, blockchain-based coin networks are decentralized, and this frees the hands of dishonest people. Accordingly, even this condition is enough to activate them.
Well, the larger the niche becomes, the more money will be in it. And scammers are unlikely to want to pass by this. Therefore, users need to learn the basics of safe storage of coins, switch to hardware wallets and not download suspicious files.
