The exponential growth of cryptocurrencies has marked a turning point in the global financial system, transforming both investment opportunities and associated risks. 

While some see them as a means to access new forms of exchange and value storage, problems related to their misuse are generating significant concern. By enabling rapid and anonymous transactions, cryptocurrencies have become an ideal platform for the proliferation of illicit activities such as money laundering, tax evasion, and terrorism financing, among others. 

The rise of cryptocurrencies has been so swift that existing regulatory frameworks have struggled to keep pace. Unsurprisingly, without coherent global legislation, fraudulent schemes and cyber scams have also increased. According to the United States Federal Bureau of Investigation (FBI), over 69,000 crypto-related fraud complaints were reported in 2023, with estimated losses exceeding $5.6 billion. These scams often include pyramid schemes, fraudulent initial coin offerings, and fake investment platforms promising extraordinary returns to investors, who ultimately lose their funds without recourse. 

Additionally, according to a report by the Financial Crime Academy, approximately $24 billion in cryptocurrencies were sent to illicit destinations in 2022, highlighting the scale of the challenge posed by the use of these assets in criminal activities. 

It is a deep-rooted challenge. The lack of transparency and regulatory gaps associated with the use of cryptoassets are increasing risks for both investors and financial institutions. The anonymity provided by these digital assets makes it easier for criminal organizations and fraudsters to transfer funds without intermediaries, allowing illicit funds to circulate without leaving a clear trail. 

This phenomenon poses a latent threat to global security, as criminals can move funds across multiple jurisdictions undetected. At the same time, current regulatory tools are insufficient to bring them to justice. Additionally, users’ lack of knowledge about cryptocurrency security measures exposes them to attacks, allowing criminals to access their keys and seize their assets. 

In this context, individual negligence is only part of the problem. The real threat lies in the absence of stricter regulation, lack of international cooperation to mitigate risks associated with the expansion of the cryptoasset market, and limited understanding of these dynamics. 

Therefore, it is essential to prioritize a general understanding of cryptocurrencies and their implications. The stability and security of both public and private financial systems depend on adopting a proactive approach to mitigate the direct and indirect effects of this activity. Without decisive preventive measures, we risk falling behind in a rapidly evolving economic landscape where technological innovation is redefining the rules of financial exchange while increasing vulnerability to emerging threats. 

Why cryptocurrencies raise so much concern

Unlike traditional financial instruments like stocks or bonds, cryptocurrencies are not backed by any government or financial institution, which increases their volatility. Additionally, the possibility of losing access to funds if a digital wallet key is forgotten adds another level of risk for users. These factors, coupled with the lack of a solid regulatory framework, have created the perfect environment for fraudsters and cybercriminals to operate without clear consequences. 

One of the most common cryptocurrency-related scams is the Ponzi scheme, where fraudsters promise high returns to early investors, using the money from new investors to pay them. This scheme is unsustainable in the long term, and when it collapses, it leaves thousands of victims without their savings. Other tactics include creating fake investment platforms that mimic legitimate sites, tricking users into transferring funds. Dating apps have also become fertile ground for scammers who pose as romantic interests to emotionally manipulate victims into investing in cryptocurrencies. 

But cryptocurrencies are not only attractive to criminals targeting unwitting individuals; they have also caught the attention of government actors seeking to use these assets to circumvent economic sanctions. Cases like that of North Korea have highlighted how some governments exploit the decentralized nature of cryptocurrencies to fund illicit programs, such as nuclear weapons development. This reality underscores the need for international government cooperation in developing public policies that can trace and block the illicit use of cryptoassets. 

The regulatory challenge

However, cryptocurrencies are not inherently bad. Their underlying technology, known as blockchain, holds immense potential to transform multiple industries, including finance, healthcare, and logistics. This technology enables transparent and secure transactions, with the ability to reduce costs and improve efficiency in various fields. Nevertheless, the risk of abuse is real, and without appropriate government intervention, criminals will continue to exploit these platforms. 

This is why creating a regulatory framework that allows for the safe and responsible development of cryptofinance is urgent. Both governments and financial institutions need to implement collaborative actions to develop solutions capable of tracking suspicious transactions, preventing money laundering, identifying irregular patterns, and alerting authorities to potential illicit activities. At the same time, it is essential to educate the public about the risks associated with cryptocurrency investments, enabling users to make informed decisions and avoid falling victim to scams. 

Although it is not an easy challenge to tackle, it is imperative that cryptocurrencies are viewed as a public risk issue, serious enough to merit inclusion on the public agenda. Rather than stifling the innovative and practical characteristics of cryptocurrencies, what must be ensured is their safe and responsible use. 

This calls for adopting public policies that protect both consumers and institutions. It is an urgent need. Ultimately, only a multilateral and coordinated approach can mitigate the risks associated with cryptocurrencies and enable their transformative potential to unfold positively in the global economy. 

Finally, the development of effective policies will need to be based on cooperation between governments, international organizations, and the tech industry. A comprehensive collaboration that closes legal loopholes and provides an adequate regulatory framework, focused on promoting transparency and security in the use of cryptoassets. 

Let’s face it. Cryptocurrencies, more than just a passing trend, represent a technological advancement here to stay, but it is the responsibility of governments to ensure their impact is positive and safe for all involved parties.