The promise is mammoth but on the flip side it has all the ingredients to be a monster, a conduit for money laundering, terrorist financing and other financial crimes. In regions where there’s no regulation or lax enforcement, digital currencies are still operating but in gray areas, raising the pressing question of accountability Can we find a way to grow and not let the system fall in the hands of criminals? In developing nations, crypto is both opportunity and a threat This duality is much more obvious in developing nations, where cryptocurrency brings opportunity and threat. It virtually connects people to global markets, bypassing the controlled environment established by traditional banking. For over 30% of the people in Nigeria, crypto has actually been a lifeline. For such a cash economy, the government of El Salvador performed another daring act by making Bitcoin legal to revamp the economy. However, this growth has been way ahead of regulation, creating loopholes for criminals to capitalize on. Due to weak enforcement, these jurisdictions usually foster unregulated exchanges, that, when combined with the anonymity of privacy coins and decentralized platforms, become tools for laundering. Unfortunately, law enforcement remains severely underfunded, under-trained, and ill-equipped to respond. That means, if cross-border anonymous transactions do happen, where do you even start tracing them? In developing countries, establishing effecting regulatory framework where regulations are already weak or laxly enforced is a task that has to walk the line between keeping innovation alive and preventing systemic risk. Give too much regulation and you choke innovation, give too little and it becomes a sanctum for crime. A prime example is India whose stance on cryptocurrency is from flat-out ban to cautious acceptance, mirroring the challenges of adopting a balanced and secure approach. Likewise, Nigeria has had an uncertain approach to regulating cryptocurrency while at the same time issuing its own digital currency. Give too much regulation and you choke innovation; give too little and it becomes a sanctum for crime The regulatory challenges need technological solutions. Tools like Chainalysis and CipherTrace track suspicious transactions and flag warnings through advanced analytics.AI and machine learning can see patterns of money laundering. Public and private sector collaboration supports these efforts. Sharing their findings and information makes for a stronger defense against criminal organizations; but are developing countries doing enough in this regard? Global coordination matters too. FATF is pushing for international standards and cooperation so countries have a roadmap to set up anti-money laundering frameworks but many developing countries are struggling to follow. Cross border cooperation, sharing information and joint investigations, is key to dismantling international money laundering syndicates. There is progress, but the work is far from finished. And so much more needs to be done. We require a composite approach. One alternative is regulatory sandboxes, which let countries trial policies within a controlled environment so that innovation isn’t curtailed in the process. The other is building capacity. Governments will have to train investigators and regulators in complex digital crimes. Private-sector partnerships would do much to share knowledge and encourage crypto businesses to adopt stronger KYC and transaction-monitoring practices. Global cooperation is key to fighting digital money laundering Developing economies lay the heaviest bets on this. Cryptocurrency can help increase financial inclusion as well as economic development; unchecked, it can as easily facilitate criminal activity. Therefore, engagement from policymakers, financial institutions, and investigators is necessary. Technology, international cooperation, and strong public-private partnerships will ensure the right balance is struck. Will we rise to the challenge, or will the risks outweigh the merits? (The writer is an economist, currently serving as a White-Collar / Financial Crimes Investigator with Federal Government.) X @ umair_fci Contact: +923008680300