Cryptocurrency, what’s next? From criminal obscurity to legitimate commerce


Cryptocurrency, as a viable transactional concept and its underlying value as a digital asset, has been on the rise for some time now. No one can deny the potential benefits of a standardised global currency and the transparency that the associated distributed ledger technology (DLT) could bring.

But, from the perspective of traditional financial services, there is undoubtedly a perceived greyer side to this world, with historic links to nefarious activity, as Marc Temple, Business Development Director at TruNarrative, explores.

Many will recall one of the more well-known scams involving OneCoin and its elusive founder – Dr. Ruja Ignatova – who was able to convince investors from around the world to reportedly part with a collective $4 billion, only to then disappear completely. Whilst this is probably the most notorious and publicised crypto scam, there have been countless so-called altcoins that have seen their values skyrocket and then fade to nothing as large investors inflate the price and then pull out – which in the crypto community is known as a ‘rug pull’.

Aside from outright scams, there is assuredly a more positive utility for blockchain-based currencies. This utility was realised by people (both good and bad) who wanted a reliable medium to transfer and hold their wealth. Prevalence amongst those with criminal intent has not gone unnoticed and law enforcement agencies are now more than capable of chasing and confiscating cryptocurrency funds: Met Police seize £180m of cryptocurrency in London.

It is the very nature of distributed ledger technology that all transactions on the blockchain are recordable and traceable. However, the anonymous entry point to the blockchain has been exploited by criminals, purchasing and exchanging currencies between nameless dark web wallets.

There are now many legitimate exchanges offering genuine retail and institutional investors the opportunity to invest in and exchange cryptocurrencies. These firms to use the same customer verification technology as more highly regulated financial services. This has not yet reached mainstream adoption, and there is still some way to go in the national and global regulation of this space.

As a result, exchanges that support cryptocurrency to fiat conversion, and some Money Service Businesses (MSBs), have unknowingly become complicit in the movement of illicit funds. This is in part due to comparably lax KYC and AML compliance controls at both the onboarding and ongoing monitoring stages of the customer lifecycle.

As per Chainalysis’ 2021 Crypto Crime Report, cryptocurrency value totalling over $21b in 2019 was received by illicit entities and was connected to everything from scams and ransomware, to the more extreme cases involving activities such as terrorism financing. The destination of these funds truly covers a global span, but with a high concentration being funnelled into jurisdictions including North America, Russia, and China.

To combat this, the major exchange Binance for example, changed the way they operate in several countries (the UK being the latest) to comply with regulatory requirements.

Whilst we are already seeing more exchanges like Kraken and implementing KYC to combat these beforementioned issues, some exchanges are still not requiring adequate checks and security measures before allowing deposits and transfers.

Understanding customers’ identities is therefore crucial to stemming the flow of illicit funds via crypto channels. Those businesses who operate in this space, and wish to continue doing so legitimately, will need to ensure robust compliance checks are carried out. Both currency exchanges and MSBs alike are embracing regtech (like the TruNarrative Platform) to conduct effective due diligence on their new and existing users throughout the customer lifecycle.

The TruNarrative orchestration Platform is trusted across several highly regulated sectors, including banking, lending, money transfer, and payment services – enabling businesses to continually screen customers and their transactions. Through TruNarrative, firms are leveraging multiple data sources, industry-leading ID/document verification, fraud detection technology, and AML screening to deliver their end-to-end risk and compliance strategies.

If cryptocurrency is to become truly mainstream, exchanges will inevitably have to adopt the same level of due diligence that traditional financial services are obliged to – providing assurance and credibility to both governments and users.

If you’d like to talk to me about any of these issues, share your thoughts, or how the TruNarrative Platform can help, please fill out the form below.