Behind the hype, there are undeniable vulnerabilities in crypto. Besides the volatility, crypto has various characteristics that make it a magnet for criminals to exploit. The transactions are pseudonymous, using a combination of alphabetical and numerical codes. It is nearly impossible to identify the ultimate controller of the wallet address without proper analytical tools.

The nature of crypto transactions also means that it has no jurisdiction boundaries. Therefore, moving crypto assets from one address to another and then exchanging them to fiat money abroad is easy. Moreover, the use of "mixers" can also raise the degree of anonymity by mixing cryptos with other random ones.

Crypto has been adopted as the main payment method in the darknet market, where illegal goods and services, such as drugs and payment card fraud products, can be traded. People only need an anonymous access to the platform and secure payment system like crypto.

Cyber​​scams are also evolving using crypto. Scammers may no longer ask victims to transfer an amount of money using a bank transfer, but request crypto as payment. Even now there are many fraudulent bitcoin investments that offer high and fixed returns, which is impossible in crypto.

In other criminal acts such as corruption in Indonesia, the detected cases to date generally are still using conventional instruments. However, amid the increasing prevalence of crypto transactions, it is possible that corrupt people may change the way they commit their crime, such as giving bribes and gratuities through crypto.

In the Asabri insurance case, for example, the Attorney General’s Office (AGO) alleged that the perpetrator had laundered money to buy Bitcoin using nominees. Although the case is still under investigation, this certainly raises awareness especially among the authorities that perhaps the crime modus is shifting now into crypto. The problem is, we just have no idea how much this ecosystem has been abused.

Bloomberg reported last month that Binance Holding Ltd., one of the largest crypto exchanges in the world, was coming under investigation by the United States Department of Justice and Internal Revenue Services for allegedly engaging in illicit activities, namely money laundering and tax evasion. This reflects that the US government has implemented the supervision further not only to the crypto players, but also to the exchanges.

Meanwhile, we in Indonesia are still dealing with establishing the crypto infrastructure, such as crypto exchanges, clearing houses and depository. Therefore, its supervision has not been effectively undertaken.

In the context of the Anti-Money Laundering/Counter Financing of Terrorism (AML/CFT) regime, crypto risks can be minimized by adequate AML/CFT implementation. The customer due diligence (CDD) process carried out by the exchange shall be the first procedure to ensure that the money coming into crypto platforms is not derived from criminal acts.

However, reflecting on the Asabri case, if the perpetrators of criminal acts use nominees, it will surely be harder for the exchanges to carry out the monitoring process. In addition, there are illegal exchanges and over-the-counter trading, where trades are conducted without legal exchange mediation. This will be the main challenge in detecting criminal acts in crypto.

Responding to the issues, Indonesia still has a critical task related to crypto detection. There is an urgent need for integrated cooperation between government agencies. We want this industry to progress, while on the other side, maintaining the climate of integrity is the top priority.

The Commodity Futures Trading Regulatory Agency (Bappebti) as Indonesian exchange regulator must immediately finalize the establishment of crypto infrastructure. Parallel to that, there must be a continuous monitoring and law enforcement of illegal exchange practices to protect the penetration of illicit funds.

Public education is also important to ensure customers no longer use illegal exchanges. They exist because there is demand. Once the demand decreases, they will gradually disappear.

On the other hand, the investigators and the Indonesian Financial Transaction Reports and Analysis Center (PPATK) needs to establish proactive detection measures of crypto-related crime. Although the crypto players’ identity is only displayed in the form of a code, all transaction details are stored in the blockchain and cannot be changed.

The details of these recorded transactions become the audit trail. Investigators must have blockchain analysis technology to trace crypto transactions more quickly and precisely. Cooperation with exchanges must also be maintained, so the data exchange can be faster.

To sum up, crypto should not be seen as a threat, but an opportunity to create an investment ecosystem that is in line with technological developments. The most important thing is developing risk mitigation and technology-based detection to maintain the whole system integrity. Immediate actions are needed, otherwise it will be harder to catch up.

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The writer is a financial crime analyst. The views expressed are her own.