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 file 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 “previous wine in new bottles” frauds — resembling Ponzi and pump-and-dump schemes or new crypto-specific fraud typologies like tackle poisoning — the worldwide fraud epidemic is hitting the {industry} exhausting and undermining client 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 retaining tempo with evolving Anti-Cash Laundering (AML) guidelines. In spite of everything, 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 exhausting to scrub up its picture within the eyes of world regulators, lots of whom are beginning to look to manage 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, can have restricted impact in isolation.
The {industry} wants a a lot bolder method to anti-financial crime knowledge sharing.
Cross-sector public-private knowledge sharing to deal with fraud is quick changing into the norm within the TradFi sector. Whether or not by way of obligatory anti-scam knowledge sharing between monetary companies and telcos in Singapore or industry-led voluntary schemes in Australia and the UK, knowledge 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 current data-sharing efforts is not going to solely assist to construct a powerful ecosystem however may even profit the {industry} itself.
Principle 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 prison can not 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 aspect seeing the entire image, failing to share knowledge 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 not do that with out the important knowledge flows wanted to identify and block people from coming into their ecosystem, knowledge which it should supply from additional up the worth chain.
Third, whereas the desire to deal with fraud inside the digital property group is rising, compliance as a career inside the sector is a nascent self-discipline. The {industry} would profit from exhausting knowledge and the expertise of established fraud prevention specialists throughout different sectors, for whom the varieties of rising frauds are “enterprise as normal.”
Whereas the arguments in favor of cross-industry knowledge sharing to stop crypto-linked fraud are clear, what must occur to implement the idea?
Accelerating collaboration
The UK presents a doubtlessly hospitable coverage setting for the {industry}’s first forays into cross-sector knowledge sharing.
From a authorized perspective, the UK privateness regulator, the Data Commissioner’s Workplace, not too long ago acknowledged unequivocally that “knowledge safety is just not an excuse when tackling fraud and scams.” That is notably related to latest crimes, one in every of which noticed scammers steal $1.2 million by posing as regulation enforcement and crypto pockets hosts to trick victims into revealing private info.
Coupled with latest legislative adjustments to the information privateness regime within the type of the Knowledge (Use and Entry) Act 2025 — which establishes crime prevention as a “acknowledged official curiosity” — the authorized argument for sharing couldn’t be clearer.
Subsequent, the regulatory horizon for digital asset regulation within the UK offers carrots and sticks for fraud prevention and knowledge sharing. The UK Chancellor’s announcement on future regulation strongly suggests the digital property {industry} might be certain by the identical client safety guidelines because the TradFi sector. It’s tough to think about UK client safety towards fraud with no cross-industry data-sharing ingredient.
The carrot can be there with the Monetary Conduct Authority — and the acknowledged future digital asset regulator — stating knowledge sharing is a key software 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 might be accelerated.
The crypto and digital asset group is aware of solely too nicely 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 knowledge sharing is a key enabler of efficient fraud prevention worldwide. Given the UK’s conducive setting, 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 supposed to be and shouldn’t be taken as authorized or funding recommendation. The views, ideas, and opinions expressed listed below are the writer’s alone and don’t essentially replicate or symbolize the views and opinions of Cointelegraph.
