The huge sums of money lost to crypto scams and scams are perhaps the largest financial plunder in U.S. history.
The FBI recorded losses of more than $12.5 billion in 2023, an increase of 22% from the previous year. The agency's Internet Crime Center received a record 880,418 complaints from Americans about virtual currency and potential online theft. Considering that most targeted individuals do not report incidents to law enforcement, these statistics hint at an even more frightening reality.
Solving this situation requires collective action, from robust security solutions to innovative regulatory and policy frameworks. It is the only solution and many of those already affected are on borrowed time.
We call on community leaders, politicians and policy makers to strengthen and protect vulnerable communities. The current situation requires proactive and long-term measures. This is a battle between good and evil, and regulators and crypto innovators should be allies, not adversaries.
Like it or not, cryptocurrencies are here to stay. However, it cannot sustain itself in its current form. To advance this breakthrough technology and enable more people to thrive in a secure economic environment, we must prioritize accountability and transparency.
Let's make crime illegal again.
Strategic interventions are mission critical
Washington, DC must take immediate and decisive action to protect consumers from the rampant fraud plaguing the cryptocurrency space.
With a new bull cycle underway, new user and capital inflows only increase risk.
As the largest financial power, the United States is in dire need of a robust and clear regulatory framework to effectively combat crypto-related crimes. Its current shortage puts investors, traders, and consumers at significant risk. Fragmented oversight by agencies like the SEC, CFTC, and IRS creates loopholes that hackers can exploit. Enforcing anti-money laundering laws in this chaotic situation is an uphill battle.
Please see the Opinions section for more information. Small regulations are the biggest enemy of virtual currency
In addition to comprehensive policies, legislators should establish strict reporting and inspection standards for both enforcement agencies and crypto businesses. This enables stakeholders to quickly identify and stop illegal activity, providing real-time protection to potential victims.
Prevention must be prioritized over response. It is essential to introduce deterrence measures that make attacks economically wasteful. Additionally, providing appropriate training and education to local enforcement agencies and security personnel is critical to effectively combating crypto crime both proactively and reactively.
By laying the foundation, legislators will pave the way for innovators and entrepreneurs to develop solutions that address security concerns at both the protocol and user level. As the technological landscape rapidly evolves, instilling trust in the cryptocurrency ecosystem is of paramount importance.
From virtual currencies to Ponzi schemes
Technology is inherently neutral. Its morality, like nuclear reactors and quantum computers, depends on its application in a particular situation.
According to Pew Research Center, over 43% of crypto investors expressed doubts about the security of the crypto industry in 2023. This statistic highlights the urgent need for legislative intervention. The devastating consequences of losing wealth to hacking or fraud affect individuals from all walks of life, including fathers, single mothers, college students, the elderly, and just about anyone involved in crypto investing.
FBI data shows that consumers lost more than $29 billion between 2021 and 2023. Unfortunately, many of these incidents went unreported due to inadequate infrastructure, social stigma, and lack of confidence in the effectiveness of retaliatory measures.
The situation is further complicated by the escalating use of cryptocurrencies in various illegal activities such as financial crime, money laundering, human trafficking, and terrorist financing.
Malicious attackers leverage highly sophisticated technologies and techniques, often staying two steps ahead of law enforcement. Tracking their actions and holding them accountable is extremely difficult and requires specialized skills and resources.
For example, since 2017, North Korean hacker groups have stolen $3 billion worth of tokens, according to estimates by the United Nations Security Council. North Korea may have been involved in 17 crypto-related thefts and hacks in 2023 alone, draining more than $750 million, or about 50% of the country's foreign exchange earnings.
Beyond North Korea, Iranian and Russian groups also make extensive use of private crypto assets to launder stolen funds, purchase illegal weapons, and evade sanctions.
Thousands of new Ponzi trading platforms also emerge every month, targeting individuals through platforms such as Twitter, Facebook groups, and TikTok. These lure people into their traps from social media, often starting with seemingly innocuous interactions and moving onto communication platforms such as WhatsApp.
Once involved, the scam begins by manipulating the victim through various senses and emotions. What starts out as a small investment can quickly escalate and in a few weeks he can use up his entire savings, like $401,000. Cryptocurrencies are often used as an anonymous conduit, with victims persistently coerced into further investments, exacerbating the complexity and severity of the fraud.
Law enforcement will issue a report on the incident, but by the time they reach any conclusions, their wallets will be long gone.
Building a new policy framework to address new challenges
Cryptocurrencies present unique challenges. Outdated, one-size-fits-all approaches are insufficient to strengthen security and protect users in this rapidly evolving industry.
Simply being compliant is not enough. Regulators will also maintain market integrity and require crypto exchanges and wallet providers to better protect investors' capital, inspire investor confidence, foster innovation through awareness, and support the ecosystem as a whole. must be demanded to be protected. The balance between security and innovation is paramount. Overemphasizing either aspect risks undermining progress.
Despite the challenges, the United States, as a regulatory leader, has the ability to effectively navigate this situation.
American families are calling on Congress to act quickly and decisively to address the crisis by introducing stricter regulations on cryptocurrencies. Entrepreneurs are happy to help.
If we can't protect people's finances in 2024, what does that mean for the future of our financial system?
Bezalel Ehsan Labib, a former member of IDF Cyber Unit 8200, is an experienced entrepreneur with deep expertise in technology and innovation. He currently leads Lionsgate Networks, a blockchain analytics company specializing in professional capital recovery services for digital asset investors in a $2.5 trillion+ market. Prior to this role, Bezalel founded an investment banking firm supporting AI startups and developed Hallelujah, his Web3 migration pattern that pioneered global music rights.
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