Until recently, there were “green candles galore” in the cryptocurrency markets since Trump’s election victory. Bitcoin momentarily broke the important $100.00 level, a near 500% recovery from the Crypto Winter 2022 lows, and crypto optimism is even reaching Congress, where talks about a US Bitcoin National Reserve The US are gaining strength.
If stock market bull runs are marathons, cryptocurrency bull runs are dizzying races. But buyer beware: When cryptocurrencies rise and FOMO takes hold, scammers seize the moment and turn the hype into a gold mine for illicit activity.
Without a clear regulatory framework yet, the risks are amplified. As former President Trump returns to office with a more pro-crypto Congress, regulatory change appears imminent. But what risks do investors face if law enforcement measures are not adequately funded?
The results of the 2024 election could mark a pivotal chapter in the history of cryptocurrencies. Can the new Trump Administration rise to the challenge of not only unlocking greater innovation in crypto, but also better protecting its users and investors?
Why law enforcement and protection should remain a priority
Cryptocurrency bull runs are often accompanied by an increase in scams and fraud. In 2023 alone, a period of rising prices, the FBI’s Crypto Fraud report showed that there were $5.6 billion in reported losses related to crypto scams and frauds. A staggering 70% ($3.9 billion) of these losses were due to investment scams.
While phishing scams are prevalent in a digital world, the tenfold increase in Bitcoin ATM scam losses from 2020 to mid-2024 shows the problem in a tangible way. $65 million was stolen in just the first six months of 2024 through Bitcoin ATMs, with an average loss of around $10,000 according to the Federal Trade Commission. Together, these figures show the financial damage and expose gaps that must be addressed to protect consumers and deter bad actors, especially if cryptocurrencies are to continue to gain traction and popularity.
The UK has shown how government policy can be adapted to directly address the rise in cryptocurrency-related crime. In 2024, legislative updates were made to allow law enforcement to more effectively investigate, seize and recover illicit crypto assets. Key measures include allowing the seizure of assets without prior arrests, confiscating items related to the investigation such as passwords, transferring assets to wallets controlled by law enforcement, destroying certain crypto assets such as privacy coins when necessary, and allowing victims to claim their funds.
The challenge is to find a balance between the measures implemented in the United Kingdom while ensuring the privacy and sovereignty of cryptocurrency users.
To maintain its reputation as a global leader in financial regulation, the United States must establish frameworks that encourage innovation while protecting market participants from bad actors, and refocus efforts toward investigating criminal activity.
At the heart of the problem is regulatory ambiguity, which has plagued the crypto industry for years. In 2024, even as Bitcoin and Ethereum spot ETFs gained approval, enforcement actions against major crypto institutions intensified, something critics cite as a contradictory approach to oversight. This uncertainty stifles innovation and leaves companies struggling to navigate an inconsistent regulatory landscape.
For the incoming Trump administration, there is an obvious starting point for solving high-level compliance problems: creating a clear division of responsibilities between agencies like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission. (CFTC) to eliminate regulatory overlap. or opaque rules. But that only partially solves the larger problem.
Protecting investors protects the growth potential of cryptocurrencies
Compliance frameworks are only as strong as those who investigate and enforce them. Effective enforcement requires investment, not only from individual companies but also from law enforcement agencies. If there is no one to enforce the rules, bad actors have little to fear. Regulatory agencies have historically lacked the specialized resources necessary to oversee the rapidly evolving digital asset landscape, especially at the state level. The Trump administration now has the opportunity to prioritize investment in specialized law enforcement capabilities, equipping agencies with the tools, talent and technology to stay ahead of sophisticated bad actors.
For example, this could involve creating deeper channels for police collaboration and facilitating public-private partnerships to monitor and prevent illegal activities in the digital asset space. It could also significantly reduce the heavy-handed enforcement approach currently applied to the crypto industry.
By allocating funds to train staff and develop resources tailored to digital assets, agencies can better track, investigate, and prosecute illicit activities. Additionally, public and private investments in blockchain analytics tools could enable more effective tracking of transactions, deter bad actors, and aid asset recovery in cases of fraud.
This strengthened enforcement strategy would not only protect consumers but also enhance the legitimacy and reputation of the US digital asset market on the global stage.
What will cryptocurrencies be like under a pro-crypto president and Congress? For me, the future is exceptionally bright. However, the path forward will require active dialogue, strategic investments and a collaborative commitment between industry leaders and regulators. This moment has the potential to redefine the digital asset landscape in the US, setting a high standard for the world.
