Cryptocurrency and National Security: Crime, Psychology, and the Fight for Financial Control

Crime, Power, Psychology, and the Case for Measured Enforcement

Cryptocurrency was born from a distrust of centralized power. It promised peer-to-peer value transfer without banks, without gatekeepers, without borders. For investors, it meant opportunity. For technologists, it meant innovation. For governments, it introduced a new variable into financial control.

For criminals, it introduced efficiency.

Over the past five years, cryptocurrencies have moved from the fringes of internet subculture into the center of national security discussions. Intelligence agencies track wallet flows. Sanctions regimes now include crypto addresses. Law enforcement units now include blockchain forensic teams. Major exchange hacks trigger diplomatic reactions. Crypto-enabled ransomware disrupts hospitals, pipelines, and municipalities.

The reason is not ideology.

It is infrastructure.

Cryptocurrencies created a parallel financial rail that operates globally, continuously, and with fewer traditional choke points. That rail does not inherently belong to criminals. But criminals understood its advantages quickly.

To understand why cryptocurrency and national security are now intertwined, we must first understand the scale.

TL;DR

• Crypto-enabled crime has grown in absolute dollar terms over the past five years, with blockchain analytics firms estimating tens of billions of dollars annually flowing through illicit wallets.
• Stablecoin laundering is increasingly dominant in illicit flows.
• Major cases include ransomware attacks, billion-dollar exchange hacks, darknet market operations, sanctions evasion networks, and suspected human trafficking payment flows.
• The psychological appeal of crypto in criminal circles is as important as the technical features.
• Public perception often exaggerates proportional impact.
• Blockchain forensic investigations have enabled some of the largest asset seizures in financial history.
• Precision enforcement, not prohibition, determines the long-term outcome.

Executive Snapshot

• Crypto-enabled crime has scaled rapidly in dollar terms.
• Stablecoins now dominate many illicit transaction flows.
• Ransomware and state-linked cyber operations pose strategic risk.
• Public perception frequently amplifies fear beyond proportional reality.
• Enforcement precision determines long-term stability.

The Scale of Crypto-Enabled Crime Over the Last Five Years

Blockchain intelligence firms such as Chainalysis and TRM Labs publish annual crypto crime statistics based on wallets identified as tied to criminal enterprises, sanctions evasion, scams, ransomware, darknet markets, and laundering networks.

These figures represent funds received by wallets that have been attributed to illicit behavior. They are conservative and often revised upward as new clusters are identified.

Approximate reported figures:

• 2021: Roughly $14 billion in illicit cryptocurrency transactions.
• 2022: Between $20 and $40 billion depending on attribution revisions.
• 2023: Approximately $24 to $46 billion.
• 2024: Over $40 billion known at reporting time.
• 2025: More than $150 billion in illicit flows according to some analytics estimates, driven heavily by sanctions-linked entities and large-scale laundering infrastructure.

These numbers require context.

To contextualize scale, blockchain analytics firms consistently report that illicit transactions typically represent well under 1% of total on-chain crypto activity in most years. The absolute dollar figures are large, but the relative share of global crypto volume remains a minority.

By comparison, the United Nations Office on Drugs and Crime has historically estimated that traditional money laundering represents between 2% and 5% of global GDP annually. Illicit finance predates cryptocurrency by decades.

These figures do not represent total global crime. They reflect identified illicit wallets operating on public blockchains. Still, the pattern is unmistakable. Crypto-enabled crime is measurable, scalable, and in some cases state-aligned.

National security officials do not see internet novelty in these numbers.

They see infrastructure.

Why Criminal Networks Adopt Crypto

Criminal organizations adopt tools that reduce friction, expand reach, and lower dependency on intermediaries.

Crypto satisfies all three.

Settlement is final. Traditional banking systems allow reversals and freezes. A confirmed blockchain transaction is extremely difficult to reverse.

Transfers are borderless. A ransomware operator can receive payment across continents without correspondent banks.

Pseudonymity reduces identity friction. Wallet addresses do not automatically reveal legal identities.

Liquidity exists at scale. Stablecoins reduce volatility risk during transit and simplify laundering layers.

Automation enables structured fraud and distributed payout schemes.

Crime follows efficiency. Crypto improved efficiency.

10 Eye-Opening Crypto Crime Cases from the Last Five Years

The following cases illustrate why cryptocurrency and national security are now inseparable.

1. The Bybit Mega Hack

In 2025, approximately 1.5 billion dollars in cryptocurrency was stolen from the exchange Bybit. United States authorities attributed the attack to actors linked to North Korea. Funds were rapidly dispersed across thousands of wallets, demonstrating a high level of laundering sophistication.

This case reinforced a strategic concern. State-linked cyber groups can convert digital intrusions directly into financial resources at scale.

2. The Ronin Bridge Hack

In 2022, more than 600 million dollars was stolen from the Ronin bridge, a cross-chain protocol supporting a popular blockchain game. Investigations tied the theft to North Korean actors.

Cross-chain bridges emerged as systemic vulnerabilities. They became high-value targets because they aggregate liquidity.

3. The Poly Network Exploit

In 2021, attackers exploited vulnerabilities in Poly Network and accessed over 600 million dollars in digital assets. Although much of it was eventually returned, the exploit exposed architectural weaknesses in decentralized systems.

The message was clear. Infrastructure risk can scale quickly in crypto ecosystems.

4. The Silk Road Bitcoin Seizure

Years after the original Silk Road darknet marketplace was shut down, United States authorities seized more than 3 billion dollars worth of Bitcoin linked to the platform.

This seizure demonstrated something often overlooked. Blockchain transactions are permanently recorded. Evidence does not expire.

5. The Bitfinex Laundering Case

In 2022 and 2023, authorities recovered billions in Bitcoin tied to the 2016 Bitfinex exchange hack. Investigators traced funds across years of movement through complex laundering attempts.

This case challenged the narrative that crypto is inherently untraceable.

6. The Hydra Darknet Market Shutdown

Hydra, once the largest darknet marketplace, processed billions in cryptocurrency transactions for illicit goods before being dismantled by international law enforcement.

Crypto enabled global black markets to function without traditional payment processors.

7. Tornado Cash Sanctions

In 2022, the United States sanctioned Tornado Cash, a mixing service used to obscure cryptocurrency transactions. Authorities alleged it was used to launder proceeds from major hacks.

The sanctions sparked debate about privacy, code, and liability. They also underscored how laundering infrastructure becomes a national security issue.

8. Bitzlato Exchange Charges

Authorities charged operators of Bitzlato, an exchange accused of processing hundreds of millions of dollars in illicit funds, including ransomware proceeds.

Off-ramps are critical pressure points. Crime depends on conversion.

9. DMM Bitcoin Theft

In 2024, hundreds of millions of dollars were reportedly stolen from the Japanese exchange DMM Bitcoin. Centralized custodians remain attractive targets due to asset concentration.

10. Suspected Human Trafficking Networks and Crypto Flows

Recent reporting revealed an 85 percent year-over-year increase in cryptocurrency flows tied to suspected human trafficking networks. Stablecoins featured prominently in these flows. Investigators identified links to escort services, forced labor recruitment associated with scam compounds, and cross-border exploitation networks spanning multiple continents.

This case adds a chilling dimension. Crypto is not just a cybercrime tool. It can intersect with physical exploitation and human suffering.

The Psychological Side of Crypto Crime

The technical explanation is incomplete without understanding psychology.

Criminal adoption is not driven only by capability. It is driven by perception.

Perceived Anonymity

Many criminals believe crypto is anonymous. Even when that belief is inaccurate, it lowers psychological barriers. The perception of invisibility reduces fear of consequences.

Digital Distance

Crypto crime often occurs entirely online. Ransomware operators do not see the hospital corridors they disrupt. Scam operators do not meet victims face to face. Abstraction reduces empathy.

Digital distance weakens moral inhibition.

Gamification

Some exploits are treated as technical puzzles. Hackers discuss vulnerabilities in forums. Success is measured in extracted value and technical ingenuity. Crime becomes a challenge rather than a moral choice.

Community Reinforcement

Encrypted messaging channels and darknet forums create communities that normalize fraud and laundering. Peer validation diminishes guilt.

Financial Rationalization

Crypto’s speculative culture blurs ethical lines. When markets swing wildly, and wealth appears overnight, some rationalize theft as participation in a chaotic system.

How Crypto Crime Shapes Public Psychology

The psychological effect extends beyond criminals.

High-profile hacks and billion-dollar headlines shape public perception.

Fear Amplification

Large numbers dominate headlines. The public associates crypto with crime, even though illicit transactions represent a fraction of total crypto activity.

Trust Erosion

Retail investors hesitate. Policymakers adopt reactive postures. Entire ecosystems face reputational damage.

Moral Contamination

Lawful users face suspicion. Entrepreneurs building legitimate financial tools operate under a cloud of doubt.

Psychology influences regulation. Regulation influences markets.

Why National Security Institutions Worry

Crypto changes the geometry of financial power.

Sanctions rely on restricting access to dollar liquidity and global payment systems.

Crypto offers alternative routes. Ransomware relies on untraceable payment channels.

Crypto improves speed. Transnational crime depends on moving value across borders. Crypto compresses time and distance.

When these capabilities intersect with state-aligned cyber groups or trafficking networks, the issue escalates beyond fraud.

It becomes strategic.

What Governments Can Do to Curb Crypto-Dependent Crime

Effective response requires precision, not panic.

Target Financial Chokepoints

Exchanges, over-the-counter brokers, and stablecoin issuers form the conversion layer between crypto and fiat. Strong licensing, audit requirements, and suspicious activity monitoring raise barriers.

Invest in Blockchain Forensics

Specialized units that combine cyber expertise and financial intelligence can map networks and trace flows effectively.

Prioritize Asset Seizure

Disrupting profit models weakens criminal incentives more than arrests alone.

Strengthen International Cooperation

Crypto moves globally. Enforcement must move at a comparable speed through coordinated task forces.

Mandate Security Standards

Large custodians and protocols should meet clear cybersecurity benchmarks and incident disclosure standards.

Support Public Education

Many crypto crimes rely on social engineering. Educated users are harder targets.

Avoid Blanket Prohibition

Overbroad bans push activity into opaque jurisdictions and reduce visibility for investigators.

The Contrarian Defense of Crypto

If crypto were as opaque as critics claim, multi-billion-dollar seizures would not be possible years after the original crime.

The narrative that crypto is a criminal’s paradise is incomplete.

Blockchains are public ledgers. Every transaction is recorded permanently. Investigators can analyze transaction graphs, cluster addresses, and trace flows across years.

Some of the largest financial seizures in recent history were possible because blockchain data existed.

Cash does not leave such trails.

Crypto can be misused. So can the internet, telephones, and automobiles. The existence of misuse does not define the technology.

Moreover, crypto enables legitimate use cases:

• Cross-border remittances without excessive fees.
• Financial access in unstable banking systems.
• Programmable financial contracts.
• Transparent charitable donations.
• Innovation in decentralized finance infrastructure.

The national security challenge is not to eradicate crypto. It is to prevent criminal dominance of its advantages.

The Dual-Use Reality

Crypto is a dual-use technology.

It empowers dissidents and scammers.

It enables innovation and exploitation.

It enhances transparency and provides tools for obfuscation.

This duality is uncomfortable. It defies ideological simplicity.

The Strategic Question

Can societies build enforcement capacity fast enough to neutralize the criminal advantage while preserving legitimate innovation?

The answer depends on restraint as much as action.

If governments overreact, they risk suppressing economic innovation and driving activity offshore. If they underreact, criminal networks scale.

Precision matters.

The rise of central bank digital currencies will not eliminate crypto crime. It may instead intensify competition over digital financial sovereignty.

Final Reflection

Cryptocurrencies became a national security flashpoint because they weakened traditional financial chokepoints.

Criminals recognized the opportunity. Some states recognized the opportunity as well.

But the same transparency that allows funds to move globally also allows them to be traced globally.

Crypto did not invent crime. It digitized part of its infrastructure.

The psychological perception of invisibility fuels misuse. The psychological amplification of fear fuels overreaction.

The truth lies between.

Crypto is not inherently a threat to national security. Nor is it immune from abuse.

It is a powerful financial tool operating in a world where power is contested digitally.

The real battle is not over code.

It is over institutions, enforcement precision, public understanding, and the ability to adapt faster than criminal networks.

That contest is ongoing.

And the outcome will shape not only the future of cryptocurrency, but the architecture of global finance itself.

Frequently Asked Questions (FAQs)

1. How much cryptocurrency is used in crime each year?

Estimates from blockchain analytics firms suggest illicit crypto transactions ranged from roughly $14 billion in 2021 to more than $150 billion in 2025, though figures are often revised upward as more illicit wallets are identified.

2. Does crypto cause crime to increase?

Crypto does not create criminal intent. It improves efficiency in certain types of crime, especially scams, ransomware, and cross-border laundering.

3. Is cryptocurrency anonymous?

Most major cryptocurrencies are pseudonymous, not anonymous. Transactions are recorded on public blockchains, and once a wallet is linked to a real identity, past activity can often be traced.

4. What types of crimes most commonly use crypto?

Ransomware attacks, investment scams, romance scams, darknet market transactions, sanctions evasion, exchange hacks, and increasingly stablecoin-based laundering schemes.

5. Are stablecoins heavily used in illicit finance?

Yes. Stablecoins have become increasingly dominant in illicit crypto flows because they reduce volatility risk during transfers.

6. Can law enforcement trace stolen crypto?

Yes. Blockchain analytics tools allow investigators to map transaction flows and identify clusters of related wallets. Several multi-billion-dollar seizures have been executed using blockchain tracing.

7. Why do national security agencies view crypto as a concern?

Crypto reduces reliance on traditional financial chokepoints, which can weaken sanctions enforcement and enable cross-border movement of illicit funds.

8. Is banning cryptocurrency an effective solution?

Broad bans are unlikely to eliminate crypto-related crime and may reduce transparency while pushing activity into less regulated jurisdictions.

9. How does crypto crime affect public perception?

High-profile hacks and scams amplify fear, erode trust, and often lead to stricter regulatory responses, even when illicit activity represents a minority of total crypto volume.

10. What is the most effective way to curb crypto-dependent crime?

Targeting financial chokepoints such as exchanges and cash-out services, investing in blockchain forensic capabilities, strengthening international cooperation, and educating the public are among the most effective strategies.

Disclaimer

This article is for informational and educational purposes only. It does not constitute legal, financial, regulatory, or investment advice. The crime data cited is based on publicly available reports from blockchain analytics firms and government sources and may be subject to revision as investigations evolve. Readers should consult qualified legal or compliance professionals before making regulatory or policy decisions related to cryptocurrency.

Below is the academic-style reference list in APA 7th edition format, based on the sources used in the article.

References

Chainalysis. (2022). The 2022 crypto crime report: Introduction. https://www.chainalysis.com/blog/2022-crypto-crime-report-introduction/

Chainalysis. (2024). The 2024 crypto crime report: Introduction. https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/

Chainalysis. (2025). The 2025 crypto crime report: Introduction. https://www.chainalysis.com/blog/2025-crypto-crime-report-introduction/

Chainalysis. (2026). The 2026 crypto crime report: Introduction. https://www.chainalysis.com/blog/2026-crypto-crime-report-introduction/

TRM Labs. (2026). 2026 crypto crime report. https://www.trmlabs.com/reports-and-whitepapers/2026-crypto-crime-report

U.S. Department of Justice. (2022). U.S. attorney announces historic $3.36 billion cryptocurrency seizure and conviction. https://www.justice.gov/usao-sdny/pr/us-attorney-announces-historic-336-billion-cryptocurrency-seizure-and-conviction

U.S. Department of Justice. (2023). Bitfinex hacker and wife plead guilty to money laundering conspiracy involving billions. https://www.justice.gov/archives/opa/pr/bitfinex-hacker-and-wife-plead-guilty-money-laundering-conspiracy-involving-billions

U.S. Department of Justice. (2022). Justice Department investigation leads to shutdown of largest online darknet marketplace. https://www.justice.gov/archives/opa/pr/justice-department-investigation-leads-shutdown-largest-online-darknet-marketplace

U.S. Department of Justice. (2023). Founder and majority owner of Bitzlato cryptocurrency exchange charged with unlicensed money transmission business. https://www.justice.gov/usao-edny/pr/founder-and-majority-owner-bitzlato-cryptocurrency-exchange-charged-unlicensed-money

U.S. Department of the Treasury. (2022). Treasury sanctions Tornado Cash for laundering cryptocurrency. https://home.treasury.gov/news/press-releases/jy0916

Reuters. (2025, February 27). FBI says North Korea was responsible for $1.5 billion Bybit hack. https://www.reuters.com/technology/cybersecurity/fbi-says-north-korea-was-responsible-15-billion-bybit-hack-2025-02-27/

Reuters. (2022, April 14). U.S. ties North Korean hacker group Lazarus to huge cryptocurrency theft. https://www.reuters.com/technology/us-ties-north-korean-hacker-group-lazarus-huge-cryptocurrency-theft-2022-04-14/

Reuters. (2021, August 12). Over half of crypto tokens stolen in $610 million hack now returned, Poly Network says. https://www.reuters.com/technology/over-half-crypto-tokens-stolen-610-mln-hack-now-returned-poly-network-says-2021-08-12/

Reuters. (2024, May 31). DMM Bitcoin says bitcoin worth about 48.2 billion yen leaked. https://www.reuters.com/technology/dmm-bitcoin-says-bitcoin-worth-about-482-bln-yen-leaked-2024-05-31/

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Cryptocurrency and National Security: Crime, Psychology, and the Fight for Financial Control was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.