When cryptocurrency met law enforcement

Gambar oleh Miloslav Hamřík dari Pixabay

The mass adoption of cryptocurrency has gained a lot of momentum recently, it is not Uhuru yet as we are still far from the desired destination in this regard. Consequently, at some point the crypto must be traded for USDT or other available trading pairs for further trading with the desired local fiat currencies.

For those who choose to use cryptocurrency as a means to sustain their crime, at some point the cloak of anonymity they chose to hide under will have to be broken when they have to exchange whatever ill-gotten cryptocurrency they have for local fiat.

This is because at this point, which usually involves peer-to-peer transactions, their identity will have to be revealed, as no centralized exchange or bank will accept any user without the necessary knowledge of your customer records.

Blockchain itself has a unique quality that makes it useful in combating crimes committed in the crypto space. The quality is that its records are public and cannot be changed. Funds taken illegally can thus be easily traced by following the money trail.

Law enforcement agencies are investigating cryptocurrencies. Photo credit: Shutterstock
Sometimes the identity of the criminal elements is revealed when they slip through the cracks and create an opportunity to track or trace information such as their IP addresses.

Once one individual slips up, the window opens for all those involved in the criminal network to be arrested by law enforcement agencies with the records of their transactions on the blockchain as solid evidence against them.

It is becoming almost a "necessary evil" for there to be some cooperation between law enforcement and those trying to combat crimes committed in the crypto space. You might want to think of it as some sort of back channel for communication between the two parties to check the activities of the cryptovillians.

Only recently, the five major centralized exchanges in South Korea signed a memorandum of understanding with the country's law enforcement agents to work together to combat crimes such as money laundering and investment fraud in the crypto space. The exchanges involved in the agreement are:

• Upbeat
• Bithumb
• Coinone
• Gopax
• Korbit

South Korean police were motivated to enforce the deal due to the rise in cryptocurrency-related financial crimes that accompanied the mass adoption of cryptocurrencies. The crimes ranged from hacking cryptocurrency wallets to investment scams that falsely promised investors high profits.

Similarly, Chainalysis, one of the leading crime fighters in the crypto space, has been busy recently with the rise of hacks in the DeFi space. Their crypto incident response team was instrumental in helping law enforcement recover about $30 million that was stolen during the Ronin Bridge hack.

Binance, one of the largest centralized exchanges, is not left out. She also worked with law enforcement to recover some of the funds stolen in the Ronin Bridge hack. In addition to trying to provide any assistance in recovering funds during cryptospace hacks, Binance is also actively involved in organizing programs to train law enforcement agencies around the world on how to fight crimes in the cryptospace.

As reported in a Twitter thread dated September 6, 2022.

Screenshot taken on Twitter

Binance has built an impressive team that boasts ex-employees from some of the world's leading security agencies who have distinguished themselves while in the service, with some who have experience under their belts fighting cryptocurrency-related crimes.

The current collaboration between law enforcement agencies, centralized exchanges and some other key players in the crypto space like Chainalysis has been inevitable with the rise of crypto-related crimes with the hacking of several protocols and DeFi platforms coming into the limelight recently.

Everyone wants a crypto space that is somewhat secure, even though we know that there will always be bad actors, just like we have in the conventional financial system, who will always try to make profits at the expense of others. Therefore, no effort should be spared towards removing the label of the crypto space as a “wild west” where outlaws roam freely.

Thank you for reading.