It should be noted that cryptocurrency exchanges, among others, contribute to the popularity of cryptocurrencies among fraudsters and other criminals. This has become clear thanks to a fresh experiment by a well-known cryptocurrency researcher under the pseudonym ZachXBT. He decided to test the popular myth that after hacking into some project and sending stolen coins to exchanges, hackers give away their own identity and thus find themselves in the crosshairs of law enforcement.

This turned out not to be the case. In the experiment, Zack passed the verification process at Gate-io with the name “Kim Jong-un” and email address “notlazarus”, meaning the Lazarus Group of hackers, without any problems.

All in all, he went through the basic identity verification process in just a few minutes. Zach also specified “999999” as his user ID number – and that too passed.

The author then proceeded to register names from the Office of Foreign Assets Control sanctions list, and also included the email addresses “harmonyhacker” and “lazaruslover”. Alas, such actions did not provoke a reaction from the exchange either.

As Zak pointed out, hackers often use exchanges to cover their tracks in moving stolen coins. And so trading platforms because of basic verification with such obvious fake data essentially only contribute to this.

What cryptocurrencies are being criticised for

The state of affairs was summed up in a short quote by Eun Young Choi, director of the US Justice Department’s Cryptocurrency Enforcement Team (NCET). Here is the relevant rejoinder.

We see that cryptocurrencies and digital assets in general affect all aspects of criminal activity that we are investigating.

That is, officials have noted the high popularity of digital assets among criminals. However, it is important to understand here that this does not make cryptocurrencies bad. It is still more common for lawbreaking to be funded by cash fiat money, but no one bans it.

Choi noted that the MoJ has long had a crypto team, with a significant increase in digital asset fraud incidents in recent times. But the agency cannot tackle the problem with traditional methods – a fundamentally new approach is needed here, experts said.

By its very nature, blockchain technology is designed not to rely on intermediaries, and cross-border transactions are immutable and irreversible. Law enforcement agencies can freeze transfers of traditional funds, but they cannot do so with transactions of digital assets.

According to Decrypt sources, cryptomixers remain another key link in the chain of malicious activity. These are special platforms that mix users’ cryptocurrency among themselves and then send it out in different portions to new addresses. In this way, the owners of certain coins can hide their own traces, which is often used by hackers.

Earlier in this area, the US government agencies have already taken very radical measures in this direction: in particular, the popular cryptocurrency mixer Tornado Cash was blocked in the summer of 2022.

Finally, the last important factor from Choi is the promptness of notification of various incidents. The expert hinted that aggrieved crypto investors rarely seek help when they fall victim to abusers. Consequently, this practice allows many fraudsters to quickly cover their tracks and get away with it undetected.

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Unfortunately, the headache for cryptocurrency fans remains not only the fraudsters, but also the US government agencies. The most pressing issue in this context right now is the definition of Bitcoin and altcoins. The US Securities and Exchange Commission (SEC), headed by Chairman Gary Gensler, has already repeatedly stated that most cryptocurrencies can allegedly be considered unregistered securities.

But the Commodity Futures Trading Commission (CFTC) considers cryptocurrencies to be commodities, as was made clear in the regulator's recent lawsuit against cryptocurrency exchange Binance. The relevant conflict of views between regulators was one of the topics of discussion during Wednesday's US Congress meeting.

In the end, Republicans and Democrats disagreed on the need for new laws to address the digital asset classification issue. For example, House of Representatives member Dusty Johnson said the lack of regulatory clarity has held back innovation for too long. Here’s his quote.

I know that in this town they like to put off solving problems. But there are times when even Congress is clear that active action is appropriate and necessary.

Johnson hinted that the so-called Howey test, which determines whether an asset belongs in a securities class, needs to be revised. Lawmakers must clearly define the role of decentralisation and how it can be “fitted” into the Howe test. In practice, this would look like a set of rules that would “tilt” an asset towards either securities or commodities.

Nevertheless, according to Matthew Culkin, a partner at law firm WilmerHale, this is quite a challenge. It is also not helped by the actions of SEC chairman Gary Gensler. It will be recalled that he appeared before Congress last month to address the issue, but dodged the question of whether all cryptocurrencies should be considered securities.


Here, one cannot help but think of the court case between the US Securities and Exchange Commission and Ripple, which was accused in December 2020 of an alleged "unregistered offering of $1.3 billion worth of securities". As is easy to understand, the regulator has not been able to prove its case in the meantime.

However, a lot of resources had to be spent here. As Ripple CEO Brad Garlinghouse noted the day before, the company will have spent a total of $200 million on defending itself in court by the time the case is decided. Obviously, this is not the kind of expense any business wants to incur.


Another curious point of view was voiced by Stephen Lynch, a member of the Subcommittee on Digital Assets. According to him, the issue of defining cryptocurrencies as an asset class is not important – it is just a sign of a “war” between the SEC and CFTC, and a disguised desire on the part of crypto market players not to comply with any laws.


Regardless of the authorities' attitude towards cryptocurrencies, we believe the latter deserve an adequate regulatory framework - at least because of the millions of people using digital assets. Accordingly, it would be better for officials to focus their efforts not on criticizing coins, but on drafting adequate laws. Such a scenario would be much better for both investors and the country's economy as a whole.


What do you think about it? Share your opinion in our crypto-chat of ex-wealthy people. There we await the onset of a new bullrun, which is simply bound to prove more ambitious and lucrative.