The internet changed the way people communicate. How people deal with money has drastically changed with the emergence of cryptocurrency. In other words, digital assests can be traded using cryptocurrencies like Bitcoin and Ethereum without the need for a traditional bank. In 2016, a new digital asset transfer system, Decentralised Finance or DeFi, came into effect. DeFi allows people to lend as well as borrow, trade and exchange digital assets through blockchain networks and smart contracts. This development has also created new opportunities for crime. Criminals can use cryptocurrency for fraud, money laundering, ransomware, theft, illegal money transfers and market manipulation. The problem becomes more difficult when a DeFi platform claims that it has no central owner or operator. This creates a legal question: Can traditional criminal law deal with crimes committed through a decentralised financial system? International experience shows that the answer is mostly yes when identifiable people are involved, but difficult questions remain when control is spread across developers, users, governance systems and computer code.
What is DeFi?
The newly improved financial service provider, DeFi, or Decentralised Finance, is a financial service provider. It uses blockchain technology and smart contracts, completely doing away with traditional banking institutions. For example, a person can use a DeFi platform to exchange one cryptocurrency for another, lend cryptocurrency, borrow cryptocurrency, provide funds to a liquidity pool, or transfer assets in a smart contract.
A smart contract is computer code stored on a blockchain. It automatically performs an action when certain conditions are met. This is a simple legal problem.
In a normal bank: Person → Bank → Transaction → Other person
In DeFi: Person → Wallet → Smart Contract → Blockchain → Other wallet
There may be no ordinary bank employee or company sitting in the middle. It is where classical criminal law begins to run into trouble.
Is Cryptocurrency Private?
Anonymity is often a factor of cryptocurrency, but that is not always the case. Many public blockchains are pseudonymous. The blockchain may show the wallet address, amount, date and transaction history, but not the person’s real name.
For example: Wallet A → Wallet B → Wallet C → Crypto Exchange
Investigators can follow this movement on the blockchain. If Wallet C is connected to a regulated exchange, investigators may obtain the account holder’s identity through KYC records. Therefore, cryptocurrency can sometimes make crime easier to hide, but the blockchain can also leave a permanent record that investigators can examine.
How can laws be used against Crypto Crime?
One of the most important developments in international law is that governments do not always need a special offence called “cryptocurrency crime.” Existing criminal laws can often be applied to cryptocurrency. For example:
18 U.S.C. §1343: Wire Fraud. This provision deals with schemes to obtain money or property through fraud using electronic communications.
18 U.S.C. §1956: Money Laundering. This deals with financial transactions involving criminal proceeds when the required criminal intent is established.
18 U.S.C. §1960: Unlicensed Money-Transmitting Business. This makes it an offence to knowingly operate, control, manage or own certain unlicensed money-transmitting businesses.
31 U.S.C. §5318: Bank Secrecy Act powers. This provides important anti-money laundering and reporting powers for financial institutions and money-service businesses. These laws existed before DeFi became popular, but prosecutors have increasingly used them when cryptocurrency is involved.
United States v. Faiella: Can Bitcoin Be “Money”?
One of the notable early cases was United States v. Faiella, 39 F. Supp. 3d 544 (S.D.N.Y. 2014). Faiella operated a Bitcoin exchange connected to the Silk Road marketplace. He was charged under 18 U.S.C. §1960, which deals with unlicensed money-transmitting businesses. His argument was simple. Bitcoin is not traditional money, so the money- transmission law should not apply. The court rejected this argument. According to the court, Bitcoin could be considered money (or funds) under the law because it could be exchanged, used for payments, and transferred from one person to another. The significance of the case is that the court did not hold Bitcoin to be something outside the law because it was new technology.
The main lesson from this case is that the law does not necessarily become useless simply because the technology did not exist when the law was written.
United States v. Murgio: Bitcoin as “Funds”
Another seminal case was United States v. Murgio, 209 F. Supp. 3d 698 (S.D.N.Y. 2016). Murgio was involved in Coin.mx, a Bitcoin exchange prosecutors said was an unlawful Bitcoin exchange. The court considered whether Bitcoin could be considered “funds” under 18 U.S.C. §1960. The court held that it could. The reasoning was straightforward: Bitcoin had economic value, could be used as a medium of exchange and could be used for financial transactions. A 66-month prison sentence was given to Murgio.
This case showed that the criminal law can look at what cryptocurrency actually does, rather than simply what it is called.
United States v. Iossifov: Crypto Crime Has No Borders
Cryptocurrency crime is often international. This can be seen in United States v. Iossifov, 45 F.4th 899 (6th Cir. 2022). Iossifov operated a Bitcoin exchange in Bulgaria. The prosecution said a Romanian criminal network used cryptocurrency to move money obtained through fraud against victims in the U.S. The money moved across countries through Bitcoin.Iossifov was convicted of:18 U.S.C. §1962(d), RICO conspiracy And 18 U.S.C. §1956(h), Conspiracy to commit money laundering.The Sixth Circuit upheld the convictions. And this case illustrates one of the biggest problems with cryptocurrency. The victim is in one country, the criminal is in another, the exchange in a third and the blockchain everywhere. Traditional criminal law therefore requires international cooperation to work in good practice.
Future Exchange (FTX): Traditional Fraud in a Cryptocurrency Business
FTX’s collapse was one of the most famous cryptocurrency criminal cases. FTX was one of the world’s largest cryptocurrency exchanges. Samuel Bankman-Fried was convicted of fraud and misusing customer funds. He was convicted of wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud, conspiracy to commit commodities fraud, and conspiracy to commit money laundering. In March 2024, he was sentenced to 25 years in prison and ordered to forfeit $11 billion. The point is that prosecutors did not need to create a completely new offence called “FTX cryptocurrency fraud”. They used fraud and conspiracy laws. Cryptocurrency is new, but deception and misuse of money are not new crimes.
SafeMoon and Investor Fraud.
We come closer to DeFi itself with the SafeMoon case. SafeMoon was marketed as a decentralised finance digital asset. U.S. prosecutors alleged that its executives misled investors and used investor money for personal purposes. Braden John Karony, CEO of SafeMoon US LLC, was convicted in May 2025. On February 10, 2026, he was sentenced to 100 months in prison for conspiracy involving securities fraud, wire fraud and money laundering. He was also ordered to forfeit approximately $7.5 million. Such a case involved several areas of law at the same time: Securities fraud, wire fraud, and money laundering. It shows that a digital token can create legal difficulties under several existing laws.
Tornado Cash: The Most Difficult DeFi Question
Probably the most difficult legal issue is Tornado Cash. Tornado Cash is a cryptocurrency mixer. A mixer makes it harder to connect the cryptocurrency that enters the service with the cryptocurrency that later comes out. And that could be useful for privacy, but criminals can also use such systems to hide criminal proceeds. In August 2025, Roman Storm, Tornado Cash’s co-founder, was convicted in the U.S. of conspiracy to operate an unlicensed money-transmitting business. The U.S.Department of Justice alleged that Tornado Cash had transferred more than $1 billion in criminal proceeds. The significance of Tornado Cash is not just whether the criminals used Tornado Cash. The bigger question is, could the person who creates or operates a privacy-based cryptocurrency service be held criminally responsible for the unlawful use of that service? We consider that it is one of the most fundamental questions to be addressed for DeFi law and the future of DeFi law in general. It is a difficult issue, as software could be used for legal as well as illegal purposes.
Samourai Wallet- Operators and money laundering
Samourai Wallet case is another recent example. Samourai was a cryptocurrency wallet and mixing service. U.S. prosecutors alleged that it was used to move and hide criminal proceeds. Keonne Rodriguez and William Hill were convicted of running a money-transmitting business. In November 2025, Rodriguez was sentenced to five years, and Hill was sentenced to four years in prison. The U.S. Department of Justice said the service had transmitted more than $237 million in criminal proceeds. The case was international. Hill was arrested in Portugal and extradited to the United States, and the investigation involved cooperation with Europol and Portuguese and Icelandic authorities. And again, 18 U.S.C. §1960 was central to the case.
The UK approach: Proceeds of crime
The UK currently uses its Proceeds of Crime Act 2002 (POCA) to deal with criminal property (including cases involving digital assets). Important provisions include:
Section 327: Deals with concealing, disguising, converting, transferring or removing criminal property.
Section 328: Deals with being engaged in an arrangement which helps another person to get, keep or control criminal property.
Section 329: Deals with acquiring, using or possessing criminal property. The importance of these provisions is that the focus is on the criminal origin of the property, not only the form in which that property exists. A criminal can convert illegal money into Bitcoin, move it through several wallets and later convert it back into ordinary currency. The fact that the asset became Bitcoin does not necessarily remove it from money laundering law.
European Union: MiCA
The European Union has introduced a specific legal framework called the Markets in Crypto-Assets Regulation (MiCA), Regulation (EU) 2023/1114.
MiCA is important because it creates rules specifically for crypto-assets and crypto-asset service providers.
Article 59: Authorisation. A person cannot provide certain crypto-asset services in the EU unless properly authorised or otherwise legally permitted under the Regulation.
Articles 86- 92: Market Abuse. These provisions deal with prohibited conduct such as insider dealing, unlawful disclosure of inside information and market manipulation.
Article 92 requires persons professionally arranging or executing crypto transactions to have systems for preventing and detecting market abuse. However, MiCA also faces the DeFi problem. Where services are provided completely decentralised without an intermediary, the Regulation may not apply in the same way. This means that one of the biggest questions remains: Who is responsible when there is no traditional intermediary?
What is happening in the world now?
The issue is no longer theoretical.
The Financial Action Task Force, or FATF, reported earlier in its July 2026 report that DeFi is increasingly being exploited by fraudsters, ransomware operators and professional money laundering networks. As of July 2026, 132 of 143 jurisdictions had not yet implemented FATF standards for qualifying DeFi arrangements, showing regulation is still in progress. This means that international criminal law is currently moving from simply asking “Is cryptocurrency involved?” to asking “Who controls the system?” “Who benefits from it?” “Who knowingly helped the criminal activity?” and “Can that person be identified?” This is a much more practical approach to DeFi.
The main problems for traditional Criminal Law: Who is the criminal?
In a traditional bank, there is usually an identifiable company and employees.
- A DeFi platform may be: Developers; anonymous users; anonymous token holders; anonymous governance participants; anonymous validators; anonymous smart contracts; and decentralised organisations. It might therefore be difficult to identify the person who should be prosecuted.
- Proving Knowledge: Suppose a developer creates software that is later used by criminals. Is the developer automatically a criminal? No. The prosecution still has to prove the elements of the particular offence, including any required knowledge and intention. This is particularly important if mixers, privacy tools and open-source software are involved.
- Jurisdiction: A cryptocurrency transaction can take place in several countries in seconds. This creates problems concerning: Extradition; evidence; arrest; asset seizure; mutual legal assistance; cooperation between police agencies.
- Anonymous and Unhosted Wallets: A wallet may not contain the person’s name. Thus, law enforcement agencies need to connect the blockchain address to a real person through additional evidence.
Will traditional criminal law deal with DeFi?
Traditional criminal law can deal with many forms of cryptocurrency crime, but it does not solve every DeFi problem.
For example: Cryptocurrency + Fraud = Fraud law
Criminal proceeds + Cryptocurrency = Money laundering law
Illegal money transmission + Cryptocurrency = Money transmission law
Ransomware + Bitcoin = Cybercrime and related criminal laws
The greater problem is the human being behind decentralised technology. A blockchain does not go to prison. A smart contract cannot be questioned by the police. A wallet address cannot be placed in the witness box. Criminal law has to identify those who created, controlled, operated or knowingly used the system for criminal purposes.
Cryptocurrency has brought about a new world for criminals, but it has not made criminal law useless. The cases of Faiella, Murgio, Iossifov, Bankman-Fried, SafeMoon, Tornado Cash and Samourai Wallet show that courts and prosecutors are already applying existing laws to cryptocurrency-related offences. The more difficult issue is DeFi.When a financial system is controlled by a company, prosecutors can generally identify the company and its officers. If a system is truly decentralised, responsibility may be split between developers, governance participants, users and computer code. As such, the future of cryptocurrency criminal law will therefore depend on finding a balance. The law must prevent criminals from using decentralisation as a way to escape responsibility, but it must also avoid treating every developer or software user as a criminal just because someone misuses the technology.
The central question for future courts is therefore not “Are cryptocurrencies beyond the reach of criminal law? Instead, it is “Who is behind the technology, what did that person know, what did that person do, and what benefit did that person obtain?” That is where traditional criminal law is now meeting the world of decentralised finance.
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