Authored by: Mike Haley, Chief Executive Officer, Cifas
The world of finance is undergoing a significant transformation thanks to the advent of cryptocurrency; however, concerning issues are emerging. Reports indicate that cryptocurrency-related scams reached alarming levels, amounting to approximately $9.9 billion in losses in 2024. Projections for 2025 suggest this trend is likely to worsen.
Whether these schemes are modernized variations of classic scams like Ponzi schemes and pump-and-dump schemes, or entirely new crypto-specific fraud methods such as address poisoning, the global fraud crisis is severely impacting the cryptocurrency industry, eroding consumer confidence.
Criminal elements are increasingly exploiting cryptocurrencies to conceal illicit funds derived from conventional finance activities. This poses substantial compliance challenges for institutions attempting to stay ahead of evolving Anti-Money Laundering (AML) regulations. A staggering 90% of crypto registration applications in the United Kingdom are rejected due to inadequate AML and fraud prevention measures.
Cryptocurrency Sector Misuse
This exploitation of the cryptocurrency domain hasn’t gone unnoticed. The industry is actively striving to improve its reputation with global regulators, with many now contemplating regulations beyond the traditional AML framework. Although individual efforts like scam identification tools and disruption strategies are valuable, their impact is limited when undertaken in isolation.
What the industry desperately needs is a more proactive, collaborative framework for sharing data relating to anti-financial crime.
Cross-sector data sharing between public and private entities to combat fraud is rapidly becoming a standard practice in traditional finance. From mandatory anti-scam data exchanges between financial institutions and telecommunications firms in Singapore to voluntary, industry-led initiatives in Australia and the United Kingdom, data sharing is globally recognized as a vital component in the defense against fraud.
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We can only significantly hinder this surge in global crime by integrating the various components along the fraud process. As fraud adjusts to the evolving international financial landscape, the digital asset community’s absence from this collaboration is a critical gap. Incorporating the crypto community into data-sharing initiatives will not only create a more robust ecosystem but also greatly benefit the industry.
Turning Theory into Action
There are three immediate steps the industry should take.
Firstly, given that cryptocurrency’s use as a widespread payment method remains limited, even the most dedicated crypto criminal is unlikely to operate in isolation. The connection points between cryptocurrency and fiat currency represent pivotal intervention opportunities in the fight against crypto-related fraud. When each side lacks a complete picture, failing to share data becomes a considerable impediment.
Secondly, the utilization of cryptocurrency in the laundering of illicit funds results in an AML challenge. As regulatory bodies intensify their scrutiny of exchanges and implement stricter regulations, the crypto industry must establish robust defenses against the laundering of fraud proceeds. Achieving this requires essential data flows to identify and block individuals from entering their ecosystem, data sourced from earlier stages of the value chain.
Thirdly, while the commitment to addressing fraud within the digital asset space is strengthening, compliance within the sector remains a relatively new professional discipline. The industry would greatly benefit from comprehensive data and the expertise of established fraud prevention experts from other sectors, who are already accustomed to these emerging forms of fraud.
The arguments in favor of cross-industry data sharing to prevent cryptocurrency-related fraud are clear. The question is: how do we move from theoretical concepts to practical implementation?
Enhancing Collaboration
The United Kingdom provides a potentially favorable regulatory environment for the industry’s initial steps toward cross-sector data exchange.
From a legal perspective, the UK’s Information Commissioner’s Office recently emphasized that “data protection should not be a barrier when combating fraud and scams.” This is particularly pertinent considering recent crimes, including one where scammers stole $1.2 million by impersonating law enforcement and cryptocurrency wallet providers to deceive victims into revealing their personal details.
Combined with recent legislative changes to data privacy protocols in the form of the Data (Use and Access) Act 2025, which recognizes crime prevention as a “legitimate interest,” the legal basis for data sharing is now exceptionally strong.
Furthermore, the evolving regulatory landscape for digital assets in the UK incorporates both incentives and requirements for fraud prevention and data sharing. The UK Chancellor’s statements on future regulations imply that the digital assets sector will be subject to the same consumer protection rules as traditional finance. Consumer protection against fraud without cross-industry data sharing in the UK is difficult to envision.
The Financial Conduct Authority (FCA), the future regulator of digital assets, has clearly stated that data sharing is a crucial tool in preventing the laundering of fraud proceeds, thus providing an incentive.
Finally, the UK possesses a well-established financial crime data-sharing ecosystem, characterized by robust public-private, intra-industry, and cross-sector collaboration, including the Joint Money Laundering Intelligence Taskforce. Efforts to open these initiatives to the digital assets sector have already begun, and with government and regulatory support, these efforts can be accelerated.
The crypto and digital asset community are acutely aware of the reputational and regulatory threats posed by the surge in fraud. However, awareness alone is not enough; isolated efforts will not suffice. Cross-industry data sharing is an essential component of effective fraud prevention worldwide. Given the favorable conditions in the UK, it is uniquely positioned to lead by example.
Authored by: Mike Haley, Chief Executive Officer, Cifas.
This article is provided for informational purposes only and does not constitute legal or investment advice. The views and opinions expressed herein are those of the author and do not necessarily represent the views of Cointelegraph.