Opinion by: Mike Haley, CEO of Cifas
Whereas the crypto {industry} is revolutionizing the world of finance, there’s an underlying actuality effervescent beneath the floor. Hitting document ranges, cryptocurrency scams reportedly accounted for $9.9 billion in 2024 — with 2025’s forecast making for even bleaker studying.
Whether or not within the type of “outdated wine in new bottles” frauds — similar to Ponzi and pump-and-dump schemes or new crypto-specific fraud typologies like handle poisoning — the worldwide fraud epidemic is hitting the {industry} laborious and undermining shopper confidence.
Criminals are more and more abusing the sector to launder the fraud proceeds generated within the conventional finance (TradFi) sector. This creates compliance challenges for corporations protecting tempo with evolving Anti-Cash Laundering (AML) guidelines. In any case, almost 90% of crypto registration functions within the UK fail due to weak AML and fraud controls.
Crypto sector abuse
This abuse of the crypto sector is just not going unnoticed by an {industry} working laborious to scrub up its picture within the eyes of world regulators, a lot of whom are beginning to look to control the sector past the AML perimeter. Efforts by particular person corporations — like {industry} rip-off flagging instruments and disruption operations — laudable although they could be, could have restricted impact in isolation.
The {industry} wants a a lot bolder method to anti-financial crime information sharing.
Cross-sector public-private information sharing to sort out fraud is quick turning into the norm within the TradFi sector. Whether or not through necessary anti-scam information sharing between monetary providers and telcos in Singapore or industry-led voluntary schemes in Australia and the UK, information sharing is accepted globally as one of many key defenses towards international fraud.
Associated: Blockchain compliance instruments can slash TradFi prices: Chainlink co-founder
We are able to solely put a dent on this international crime wave by becoming a member of the dots alongside the fraud worth chain. As fraud adapts to the brand new monetary panorama internationally, what’s lacking on this chain is the digital property group. Bringing the group into present data-sharing efforts won’t solely assist to construct a powerful ecosystem however will even profit the {industry} itself.
Concept to motion
There are three issues the {industry} ought to do.
First, the present restricted use of crypto as a mainstream cost medium means even essentially the most dedicated crypto felony can’t exist in isolation. The on-ramping and off-ramping between crypto and fiat currencies are key intervention factors within the combat towards crypto-linked fraud. With neither facet seeing the entire image, failing to share information impedes efforts.
Second, utilizing crypto within the fraud laundering chain creates an AML problem. With regulators cracking down on exchanges and new guidelines beginning to chunk, the {industry} must construct defenses towards fraud proceeds laundering. It can’t do that with out the important information flows wanted to identify and block people from getting into their ecosystem, information which it should supply from additional up the worth chain.
Third, whereas the need to sort out fraud throughout the digital property group is rising, compliance as a career throughout the sector is a nascent self-discipline. The {industry} would profit from laborious information and the expertise of established fraud prevention specialists throughout different sectors, for whom the forms of rising frauds are “enterprise as ordinary.”
Whereas the arguments in favor of cross-industry information sharing to forestall crypto-linked fraud are clear, what must occur to implement the idea?
Accelerating collaboration
The UK affords a probably hospitable coverage surroundings for the {industry}’s first forays into cross-sector information sharing.
From a authorized perspective, the UK privateness regulator, the Data Commissioner’s Workplace, lately acknowledged unequivocally that “information safety is just not an excuse when tackling fraud and scams.” That is notably related to latest crimes, one among which noticed scammers steal $1.2 million by posing as legislation enforcement and crypto pockets hosts to trick victims into revealing private info.
Coupled with latest legislative modifications to the info privateness regime within the type of the Knowledge (Use and Entry) Act 2025 — which establishes crime prevention as a “acknowledged professional curiosity” — the authorized argument for sharing couldn’t be clearer.
Subsequent, the regulatory horizon for digital asset regulation within the UK supplies carrots and sticks for fraud prevention and information sharing. The UK Chancellor’s announcement on future regulation strongly suggests the digital property {industry} shall be sure by the identical shopper safety guidelines because the TradFi sector. It’s tough to think about UK shopper safety towards fraud with no cross-industry data-sharing ingredient.
The carrot can also be there with the Monetary Conduct Authority — and the acknowledged future digital asset regulator — stating information sharing is a key device within the combat towards fraud proceeds laundering.
Lastly, the UK has a wealthy and established monetary crime data-sharing ecosystem, with strong public-private, intra-industry and cross-sector collaboration, together with via the Joint Cash Laundering Intelligence Taskforce. Opening these initiatives to the digital property {industry} has already began, and with some authorities and regulatory backing, it could possibly be accelerated.
The crypto and digital asset group is aware of solely too properly the reputational and regulatory dangers posed by the fraud emergency. However recognition alone is just not sufficient, and efforts should not stay siloed. Cross-industry information sharing is a key enabler of efficient fraud prevention worldwide. Given the UK’s conducive surroundings, it’s uniquely positioned to guide by instance.
Opinion by: Mike Haley, CEO of Cifas.
This text is for normal info functions and isn’t meant to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas, and opinions expressed listed below are the creator’s alone and don’t essentially replicate or characterize the views and opinions of Cointelegraph.
