Does Pressure Rest on Crypto Exchanges to Stamp Out Nefarious Uses?


This last few weeks have seen an influx of tokens being moved around from the infamous PlusToken Scam that is said to have impacted near $1 billion in different crypto tokens over its time. The latest being a huge $187 million haul of ETH. 

The cryptocurrency space is still rife with illicit uses, scams, hackers and other nefarious actors which are no doubt badly impacting the nascent ecosystem. Reputation in the crypto space is key, but it is still heavily suffering from these kinds of bad actors. 

It has brought many asking the question as to what can be done to stop this reputation damaging occurrences from continually happening. There are those who believe that regulation is key, and that is still one space that is growing, but there are also those who are looking internally and wanting the cryptocurrency companies to do their bit. 

Exchanges, for example, are a key gateway to the cryptocurrency space, and this gateway also opens doors for hackers and scammers and that is perhaps why these companies have so much pressure on them to not only work with regulators, but to also implement their own work to stamp out such actors.

However, there is also evidence that even though exchanges are looking to aid the regulators and abide by KYC and other rules, there are still many ways that crypto can be used for illicit gains. But, the battle is at least waging and it is becoming harder — but not impossible — for the bad actors to do their parts. 

Using the tools

It must be remembered that hacks and scams are just one part of the reputation damage that can happen in crypto. There is also the usage of crypto for illicit goods and services, predominantly seen on the dark web. 

According to a recent report from LocalBitcoins, the peer-to-peer cryptocurrency exchange network, the number of transactions related to the darknet has decreased by 70% since they adopted KYC regulation rules.

 KYC is seen as one of the basic principles that allow for an exchange to operate in the mainstream and to be under compliance of most regulators. It is also an effective tool at stemming out those who want to use their crypto for illegal reasons. 

However, as this instance shows it is not enough to stamp it out, it is only enough to force it underground and to the dark web. Arguably, this paints crypto in a worse light as it shows that the pure technology can be used for nefarious reasons, rather than the ecosystem and the companies providing crypto services. 

Working together

There has however been a clear and obvious move from exchanges to do what they can to try and stop illicit uses of cryptocurrency, especially in the more mainstream, and in areas that they can control. For example, in the movement of coins across exchanges, like in the PlusToken scam, there were times where exchanges cooperated to shut down the movement of tokens. 

More so, the likes of Huobi have even launched an analytics tool called Star Atlas which is intended to help stop the movement of coins that have been used in illegal activities. Star Atlas is a proprietary on-chain analytics tool to monitor on-chain cryptocurrency transactions for illicit activities. The new tool aims to create a safer trading environment and ease regulator concerns that cryptocurrencies are easily manipulated by criminals.

Is it enough?

All of these actions being put out there to try and stem the tide of criminal uses of crypto, as well as illegal actions in the crypto ecosystem seem to be constantly on the move, but are they enough?

Looking at the perception of crypto in the mainstream and there are still a lot of fears about the illegal uses from those who are perhaps not as well educated. But, that perception remains and it is not totally off the mark.

It appears that there is a lot of work to be done, but if the exchanges can really stop the flow of illegal uses and do all they can to make the ecosystem hostile for criminals, this could well be the right path to travel along. 

Darryn Pollock
Darryn has been interested in the blockchain and cryptocurrency space since he heard about Bitcoin in 2015. He then decided to use his journalism degree to report on this fascinating fintech space in 2016, and has not looked back since.

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