As cryptocurrency use cases increase, tracking cryptocurrency-related crimes is becoming more difficult, according to a new report.
Cryptocurrency-related crimes and investigations, as revealed in a new analysis by Chainalysis a report, has become complex and resource-intensive compared to regular criminal investigations. This adds to the critical role that public sector investigative agencies play in combating cryptocurrency crime, underscoring the urgent need to improve recruitment and technology in the cryptocurrency space.
Over the past decade, cryptocurrencies have emerged as a focus for law enforcement, regulatory and military agencies around the world – and the focus will only increase further. The agencies are tasked with reducing risks related to cryptocurrencies in the public sector without completely removing their usability.
The survey found that public sector employees view cryptocurrencies favorably. Participants in Latin America and Europe, Middle East and Africa (EMEA) were optimistic about its place in financial markets, while participants in the Asia-Pacific (APAC) region were more skeptical.
Participants predicted a rise in crypto-criminal activity over the next five years. They also expected that investigations would require more time to track and report. About half of respondents also expressed dissatisfaction with their agencies' staffing and technical resources to investigate cryptocurrency-related crimes.
Encryption visualizations
According to the survey, more than 50% of respondents consider cryptocurrencies a legitimate form of currency, with the EMEA region receiving the highest interest at 72.4%.
However, most respondents believe that cryptocurrencies are mainly used by bad actors, such as criminals, especially in the Asia-Pacific region, with 67.7% sharing this perspective.
“These illicit use cases extend beyond the forms of cybercrime we typically consider to be native cryptocrime, such as ransomware and darknet markets, and include everything from intellectual property crime to traditional drug trafficking,” the report said.
Despite this perspective, many believe in the potential adoption and impact of cryptocurrencies on traditional finance systems, especially in Latin America, due to the economic challenges driving financial innovation.
Encryption in investigations
Most survey respondents recognized the importance of cryptocurrencies in their investigations across various sectors. There were notable differences in self-perceived expertise, with participants from the Asia-Pacific region expressing less confidence compared to those in the EMEA region.
“Subnational tax authorities reported the highest incidence of cryptocurrency-related artifacts in their investigations, as one might expect given their mandate, at 45.3%,” the report states. “Respondents in military and defense agencies reported the lowest rate at 19.0%, which likely reflects their primary focus on different types of threats and criminal activities.
Need for more encryption resources
Although experiences differed, participants agreed that additional resources were vital for public sector agencies and should be allocated to cryptocurrency investigations. Chainalysis's main argument for this was that crypto-related cases generally take longer to resolve than traditional financial and non-financial crimes.
Participants said they have experienced a significant rise in the use of cryptocurrencies in scams, fraud, cybercrime and drug-related crimes, and that more resources could help investigate a variety of crimes. The Europe, Middle East and Africa region recorded the highest level of infection.
“Overall, more than half of respondents said they were either very dissatisfied or somewhat dissatisfied with the staffing resources available at their agency for investigating cryptocurrencies,” the report said.
US participants were generally satisfied with training opportunities but were less satisfied with staffing and technical resources.
Recommendations
To address these challenges, the survey suggested that agencies increase the number of staff dedicated to cryptocurrency investigations, develop specialized training programs, invest in technology to assist investigations, and build partnerships with private sector organizations.
More than 800 public sector employees from around the world responded to the survey. Participants in the Asia Pacific region made up 44.3% of all participants, 18.1% in North America, and 10.4% in Europe, the Middle East and Africa. About a quarter of participants declined to share their location.
