An op-ed by: Mel Hewitt
For Georgia crime victims, the risks and implications of cryptocurrency are no longer theoretical. It is a daily reality in courtrooms, investigations and victim interviews. Recent cases involving crypto in Georgia have included a seizure of over $1 million in stolen crypto assets from a ring targeting real estate agents and a Georgia prison inmate who ripped off an elderly woman in Texas for $13,000 at a crypto terminal. There have already been dozens of other cases. Increasingly, crypto is involved in criminal activity targeting victims who barely know what crypto is and had little intention of ever finding out.
The current cryptocurrency marketplace offers many ways to transfer assets rapidly with very few of the safeguards a traditional bank has in place. This anonymity may be good in some situations, but it can also make it easier to victimize vulnerable Georgians. For this reason, it is long past time for digital assets to have basic investor and consumer protections in place so that law enforcement can act reasonably and appropriately to deter, prevent and prosecute crimes and so victims can recover stolen assets. Simply put, the law should prevent crimes and help victims regardless of whether the act was conducted with cryptocurrency.
Traditional securities markets, banks, credit unions and other financial institutions are subject to extensive oversight for a reason. Broker-dealers must register with regulators, disclose risks, maintain records, follow anti-money laundering requirements and protect customer assets. Public companies must provide audited financial disclosures. Investment advisors face fiduciary obligations and licensing standards.
These rules were not created to stifle innovation; they were created because history repeatedly demonstrated that unregulated financial markets attract scams, manipulation and abuse. For example, it is highly unlikely a bank would process a large transfer from an elderly person’s retirement account to a prison inmate in another state, without raising a red flag. Or allow a con artist in Gainesville to steal over $3 billion in crypto by exploiting a system error. Again, it’s highly unlikely these crimes would have happened in an even slightly regulated environment.
The risks to Georgia citizens from the current crypto regulatory structure are significant. Prosecutors and attorneys representing crime victims increasingly encounter cryptocurrency in cases involving romance scams, human trafficking, narcotics distribution, ransomware attacks, sanctions evasion and transnational fraud organizations. The largely anonymous nature of digital assets can make it easier for criminals to move funds rapidly across borders and outside the traditional banking system. For example, we regularly see crypto ATMs and kiosks used by scam artists to instantly and anonymously transfer assets from their victims. And, they are everywhere, with Georgia’s leading consumer watchdog counting more than 1,000 of these Bitcoin ATM scams in metro Atlanta alone.
Stronger regulation does not mean banning cryptocurrency. Legitimate financial innovation can and should continue, but any industry that solicits billions of dollars from the public should meet baseline standards of honesty, transparency and accountability. Crypto exchanges involving customer funds should be subject to capital requirements, cybersecurity obligations, independent audits and rigorous anti-fraud compliance programs. Platforms should implement meaningful know-your-customer and anti-money laundering controls.
From the standpoint of Georgia crime victims who have lost their savings to scams and have no way to track the funds down, the argument that these sorts of basic protections will “stifle innovation” are just not very persuasive. Financial innovation is strongest when the public trusts the integrity of the market. When you think about it, folks who are excited about the future of cryptocurrency should be first in line to make sure it does not primarily become identified with illegal activity in public opinion.
Simply put, if digital blockchain assets are to become a lasting part of the modern financial system, they must operate within a regulatory framework that protects consumers, supports law enforcement and holds bad actors accountable. The costs of failing to act are already visible in Georgia.