Crypto Crime Prevention Needs More Than Strict Laws

A financial penalty only discourages misconduct when the person considering it believes there is a meaningful chance of being caught. That simple distinction helps explain why increasingly detailed cryptocurrency regulations can coexist with fraud, money laundering, and failures that leave customers unable to recover their funds.

A new study published in Social Sciences & Humanities Open examines this problem through the economics of criminal decision-making.¹ Author Tinlaphas Chupantanarakul argues that effective digital asset oversight must change the incentives surrounding wrongdoing, rather than depending primarily on severe punishments imposed after damage occurs.

The wider implication is constructive. Crypto markets do not need to choose between innovation and accountability. They need infrastructure that makes suspicious activity easier to identify, customer assets harder to misuse, and enforcement fast enough to matter.

What The Crypto Regulation Study Examined

The research combines legal analysis, economic theory, and interviews with 15 experts in financial law, capital market regulation, and digital asset technology. It examines Mt. Gox, Terra–LUNA, Terraform Labs, and ZipMEX across Japan, the United States, and Thailand, with particular attention to Thailand’s regulatory framework.

Its central concept is expected utility: the perceived benefit of an action after accounting for its costs and risks. Applied to financial crime, this means considering potential gains, the expense of executing and concealing misconduct, the probability of detection, and the consequences of being caught.

This is a qualitative framework. The study does not measure an actual detection probability for each case or demonstrate that a particular regulatory change reduces crime by a specific percentage. Its findings identify patterns and propose explanations that require further empirical testing.

The cases also involve different problems. Theft, alleged fraud, liquidity failures, and money laundering are related through financial oversight, but they are not interchangeable. Understanding that distinction prevents an article about regulatory incentives from becoming a blanket explanation for every crypto collapse.

Why Detection Matters Alongside Penalties

Consider a simplified illustration unrelated to the study’s case data. Someone deciding whether to commit an offense might view a large penalty as manageable if detection appears extremely unlikely. Increasing that penalty changes the calculation, but improving detection can make the threat much more credible.

The paper therefore supports a more useful question than whether crypto laws are strict: do they change what an offender expects will happen?

It would be too strong to conclude that penalties never matter. They remain part of the study’s own model. The defensible argument is that penalty severity alone may provide limited deterrence when supervision is weak, enforcement is delayed, or assets can move beyond the reach of the relevant authorities.

That distinction also helps explain why writing rules and implementing them are separate achievements. Securities.io’s discussion of stablecoin rulemaking delays provides context for the operational work that follows legislation. Institutions still need systems, responsibilities, and procedures that turn legal requirements into observable controls.

What Crypto Market Failures Reveal About Oversight

The study’s comparative analysis highlights several weaknesses that can make intervention arrive too late. The following summary is drawn entirely from its case-study table.

These lessons extend beyond detecting suspicious transfers. Monitoring can flag unusual activity, but it cannot independently guarantee that a platform holds sufficient assets or respects customer ownership. Custody controls, liquidity oversight, and transaction analysis address different vulnerabilities.

For investors and customers, this suggests a practical distinction between a licensed business and a resilient business. Licensing establishes regulatory status. Resilience depends on how assets are controlled, how exposures are monitored, and whether problems can trigger intervention before withdrawals stop.

Blockchain Transparency Needs Financial Context

The paper discusses how mixing services, cross-chain transfers, and decentralized infrastructure can complicate supervision. However, its formal case-study scope focuses on centralized service providers, rather than directly evaluating decentralized finance protocols.

Public blockchains also offer a countervailing advantage: persistent transaction records. A visible transfer does not automatically identify the person controlling a wallet, reveal its commercial purpose, or establish criminal intent. But it can provide evidence that becomes more useful when connected with customer information and investigative findings.

This creates an important insight beyond the paper’s recap. The challenge often lies between systems. An exchange may understand a customer’s identity, a bank may see a fiat payment, and an analytics provider may trace a wallet’s activity. Each can hold useful information without seeing the entire relationship.

Connecting those perspectives can improve investigations. It also requires safeguards around data quality, access, and privacy. A suspicious association should support review, not automatically become proof of wrongdoing.

Measuring Crypto Crime Without Losing Perspective

External evidence illustrates both the scale of the challenge and the need for careful interpretation. In its 2026 Crypto Crime Report, Chainalysis estimated that identified illicit addresses received at least $154 billion during 2025, a 162% increase over the previous year. Much of that rise reflected activity involving sanctioned entities.

The company also estimated that illicit activity represented less than 1% of attributed transaction volume. Its totals are lower-bound estimates that can change as additional addresses are identified. They should not be presented as a complete census of crime or as money laundering losses alone.

Both scale and proportion matter. Large illicit flows justify stronger defenses, while the predominance of legitimate activity argues for targeted controls that preserve useful services.

As Securities.io’s coverage of stablecoins and faster settlement explores, digital money can compress transaction timelines. That makes timely risk assessment more valuable: controls that operate after funds have moved may leave fewer opportunities to prevent harm.

How To Judge Effective Crypto Compliance

The study’s incentive framework suggests that compliance should be evaluated through operational results. Useful questions include:

• How quickly can suspicious activity reach a qualified investigator?
• Can customer asset misuse be detected before withdrawals fail?
• Can institutions connect relevant banking and blockchain evidence?

Counting alerts alone is insufficient. More alerts can simply create a larger backlog. Detection technology becomes valuable when it produces useful evidence, helps investigators prioritize cases, and supports timely decisions.

Similarly, raising the cost of wrongdoing should not mean indiscriminately making every legitimate transaction more expensive. Better controls can restrict abusive behavior while reducing repetitive work for compliant customers and institutions.

Nasdaq’s Role In Digital Asset Crime Detection

That operational need provides a natural connection to Nasdaq, whose Verafin business supplies financial crime management technology.

On September 15, 2026, Nasdaq announced a Verafin partnership with Stablecore designed to connect digital asset transaction activity with traditional banking data. The integration supports a consolidated view of financial crime risk across fiat and digital assets.

At announcement, it was in beta with selected customers. Broader rollout to mutual customers was planned for the fourth quarter of 2026 and first quarter of 2027. Further counterparty sanctions-screening capabilities were planned after the initial integration.

The connection to the study is specific: joining information across financial systems could help institutions identify activity that fragmented monitoring misses. The partnership’s effectiveness still needs to be demonstrated in operation.

For investors, Nasdaq offers diversified exposure to this technology opportunity. It is not a pure crypto compliance investment, and the paper does not establish a revenue forecast. Customer adoption, implementation costs, competitive differentiation, and valuation remain essential considerations.

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Better Crypto Regulation Requires Earlier Intervention

The paper’s most useful contribution is a change in emphasis: financial crime prevention depends on credible controls that influence decisions before harm occurs.

For digital asset markets, progress means connecting transaction visibility with customer context, strengthening custody arrangements, and making enforcement more timely. That creates a defensible opportunity for technology providers while giving legitimate innovation a stronger foundation of trust.

References:

¹ Chupantanarakul, T. (2026). Regulatory structure and incentives for financial crime in digital asset markets: An analysis of expected utility from a legal and economic perspective. Social Sciences & Humanities Open, 14, Article 103719. https://doi.org/10.1016/j.ssaho.2026.103719