As digital asset adoption accelerates, the sophistication of illicit actors is keeping pace. At the Digital Accord Summit, industry leaders from blockchain intelligence, legal, and financial recovery fields came together to dissect what “state of the art” really means in the fight against financial crime in crypto.
The panel “The State of the Art in the Fight Against Financial Crime” hosted by Dr. Max Bernt, Global Head of Regulatory Affairs, Taxbit, the panel featured:
- Hugo Hoyland, Chief Strategy Officer, Asset Reality
- Carmel King, Partner, Grant Thornton
- Ari Redbord, Global Head of Policy, TRM Labs
- Nils von Schoenaich-Carolath, Chief Growth Officer, tradias
Together, they offered a blunt but constructive view into what’s working, what still isn’t, and what’s coming fast.
On-Chain Transparency: A Blessing and a Curse
The promise of blockchain transparency has always been that transactions are publicly traceable—but translating that visibility into enforcement remains difficult. As Redbord noted, “We now have more visibility on those transactions than we ever did in the traditional world,” but he was quick to caveat: “Blockchain analytics is not a silver bullet.”
Investigations today often start on-chain, but they don’t end there. Attribution, legal orders, and off-chain data (like exchange logs) are required to close the loop. “It’s really about marrying on-chain and off-chain data,” Redbord emphasized, highlighting the growing need for tools that help law enforcement connect the dots across platforms and jurisdictions.
Asset Recovery: Tracing Is Easy, Recovery Is Not
Despite improved traceability, actual asset recovery remains dismally low. “We’re very good at investigating—but really bad at recovering assets,” said Bernt, referencing the Bybit hack that lost over $1.5 billion. Hoyland, who works directly with governments to seize and manage assets, agreed: “The ultimate end goal is getting funds out of criminals’ pockets, and that part is still the weakest link.”
The problem isn’t always technological—it’s operational. Hoyland broke it down: asset seizure requires speed, coverage, and security. Without those, crypto can slip through investigators’ fingers, sometimes literally. “We’ve seen cases where seed phrases were seized, but the assets were moved before law enforcement could access them.”
Civil Recovery: When Law Enforcement Lags
In jurisdictions where public resources are scarce, civil proceedings offer a faster route. King, an insolvency practitioner specializing in crypto asset recovery, noted the agility of civil litigation: “I’ve had court hearings and freezing orders within hours—sometimes even before a hearing is scheduled.”
King’s work includes support for victims of scams and hacks, but also managing orderly wind-downs of crypto firms. Her message was clear: civil recovery is not a silver bullet, but in the absence of responsive law enforcement, it can be the only path to restitution. “We’ve used civil tools to recover significant assets—fast—for very vulnerable victims,” she said.
Selling Seized Assets Without Crashing the Market
One of the more surprising insights came from von Schoenaich-Carolath, who helped facilitate the German government’s high-profile liquidation of 50,000 seized BTC—valued at €2.7 billion at the time. The challenge? Selling that amount without tanking the market.
Using over-the-counter (OTC) channels, Tradias helped orchestrate the sale quietly. “More than 95% was done OTC—no one even saw it,” von Schoenaich-Carolath explained. The public panic only came when wallet movements were misinterpreted, triggering a 10–15% price dip due to false speculation.
This episode underscores the importance of white-labeling or “whitewashing” coins before public liquidation. As von Schoenaich-Carolath put it, “People buying from the government don’t want trouble—they want clean coins.” Without that assurance, even innocent buyers can end up on the wrong end of a law enforcement knock.
Crypto Taxes as a Financial Crime Frontier
While illicit hacks and laundering dominate headlines, tax evasion is quietly becoming the largest volume driver of financial crime investigations. Thanks to agreements like the Crypto Asset Reporting Framework (CARF), tax authorities now have unprecedented access to off-chain data.
Bernt noted, “Investigations that took four hours now take two seconds.” With compliance automation and data ingestion pipelines improving, the days of low-risk non-compliance are numbered. As von Schoenaich-Carolath put it bluntly: “Better pay your crypto taxes—because the state is getting very good at finding you.”
AI, Tether, and What’s Next
The future of financial crime investigations is as much about AI as it is about blockchain. Redbord warned that AI is already being used by bad actors to automate scams and laundering. But the same tools are now in the hands of law enforcement and intelligence firms. “It’s not three years from now. It’s three minutes ago,” he said.
A highlight example of proactive industry collaboration is the T3 partnership (Tether, TRON, TRM Labs), which has already recovered over $150M. This model—private firms working alongside governments to identify, seize, and block illicit funds—is what the panel sees as the future of effective enforcement.
Conclusion: The Tools Are Here—Now It’s About Execution
The state of the art in fighting financial crime isn’t defined by any one technology or regulation—it’s about how well different pieces work together. Public-private partnerships, smart data integration, and pragmatic compliance will separate the jurisdictions that thrive from those that lag.
And while blockchain may have once been seen as the Wild West, the tools for bringing law and order are not only here—they’re getting sharper by the day.
To learn more, watch the full panel discussion on demand today.
