Content provided by Chainalysis
By Gurvais Grigg
Cryptocurrency has changed the way we use and think about money, creating a borderless, 24/7, near-instant digital payment system that anyone in the world can access. But like other groundbreaking technologies, crypto has also attracted criminals that are eager to exploit blockchain for their own purposes.
While only about 0.3% of all crypto transactions are illicit, the sheer scale of global cryptocurrency adoption means that billions of dollars are funneled into criminal activities each year. Understanding cryptocurrency related threats and how to defeat them is critical to public safety and preserving trust in this financial innovation.
THE RISE OF CRYPTOCURRENCY IN CRIME
Although these crimes often originate in transnational networks, their consequences are increasingly felt at the community level, where fraud and scam victims face financial and psychological devastation. Ransomware attacks on schools, hospitals, and small businesses have disrupted critical services, with ransomware payments exceeding $1 billion in 2023 alone. Crime involving cryptocurrency has become a shared battle across borders and jurisdictions.
Despite the scale of the issue, the transparency of blockchain enables investigators to trace and recover illicit funds, dismantle criminal networks, and bring perpetrators to justice.
BLOCKCHAIN: A POWERFUL TOOL FOR INVESTIGATORS
While cryptocurrency is sometimes misused by criminals, the underlying technology — blockchain — gives law enforcement a unique advantage: transparency. Unlike cash transactions, blockchain transactions are recorded on a public ledger, creating an immutable and traceable record of financial activity. This transparency enables investigators to “follow the money” in ways that were previously inconceivable.
Blockchain intelligence tools have transformed the way crimes are investigated. For example, Chainalysis solutions have been instrumental in tracing stolen cryptocurrency funds linked to ransomware and other cyberattacks. The wealth of data available with blockchain, coupled with advanced analytics tools, enables law enforcement to connect seemingly unrelated transactions and uncover patterns that might otherwise remain hidden.
BLOCKCHAIN AND LAW ENFORCEMENT: CHALLENGES AND SOLUTIONS
Despite blockchain’s potential as an investigative tool, many U.S. state and local law enforcement agencies face significant challenges in applying it effectively.
Many agencies lack the expertise needed to understand blockchain technology, analyze transactions, and interpret cryptocurrency data. This limits their ability to investigate and prosecute crypto-related crimes effectively.
The crypto literacy gap
Meanwhile, the public remains largely unaware of the scale of the threat posed by crypto-related scams, unprepared to protect themselves, and unsure of how to respond if targeted. This gap is further widened by law enforcement’s own challenges in effectively educating and equipping communities to navigate these risks.
To counter these threats, crypto literacy and blockchain analytical capabilities must become integral to all investigative programs. No longer can blockchain analysis and investigations be the sole responsibility of elite cyber units. By equipping teams at every level with tools and intelligence, organizations can build sustainable and comprehensive defenses against criminal misuse of blockchain.
Equip your team with the tools they need today — read the Crypto Investigations Field Guide for Law Enforcement. This practical resource helps law enforcement quickly identify cryptocurrency assets during field operations, empowering officers to seize opportunities that facilitate arrests, recover assets, and support successful prosecutions.
Scale and speed of crypto crime
The speed, sophistication, and sheer volume of modern criminal activity often overwhelms the response capabilities of organizations and governments. While great strides are being made to combat crypto-related crime like scams, fraud, and money laundering, many organizations still lack trained personnel, tooling, and data to address these dynamic threats.
To address this challenge, law enforcement must invest in advanced tools capable of analyzing blockchain data at scale to automate the identification of suspicious activity, flag high-risk transactions, and provide actionable insights in real time. Proactively detecting illicit activity requires not only technological investment but also a strategic focus on building analytical capabilities within law enforcement agencies.
Data silos and jurisdictional barriers
The global nature of cryptocurrency poses additional difficulties, particularly in terms of data fragmentation and jurisdictional divides. Criminal networks often exploit these barriers, operating across borders to evade detection and prosecution. This hampers investigations, as data and evidence are often scattered across multiple platforms, jurisdictions, and agencies.
To overcome these barriers, law enforcement must prioritize interagency collaboration, public-private collaboration, and the development of shared datasets. Efforts are being made to enhance the reporting and sharing of intelligence, but there is a critical need for increased information sharing for gathering intelligence, coordinating responses, and bolstering security locally and globally.
PREPARING FOR EMERGING THREATS
Cryptocurrency is reshaping the nature of crime, but it has also created unprecedented opportunities for law enforcement to fight back. As criminals turn to advanced obfuscation methods like mixers and privacy coins, investigators can counter these efforts with advanced blockchain analytics tools and agile investigative strategies. Embracing the power of blockchain intelligence, investing in training and technology, and fostering collaboration are essential to stay ahead of criminal networks.
While the challenges are substantial, the opportunities for success are even greater. By harnessing blockchain’s inherent transparency and promoting public-private partnerships, law enforcement can dismantle illicit operations, protect communities, and uphold public safety in an increasingly blockchain-activated world. Engage with Chainalysis to discover tools, expertise, and crypto-enabled insights needed to help turn the tide against crypto-enabled crime.
About the author
Gurvais Grigg, a former FBI special agent with 30-plus years of public and private sector experience, now serves as the global public sector CTO at Chainalysis, empowering law enforcement to use blockchain technology to defeat crypto-related crime.