Crypto sheds ‘criminal currency’ tag as illicit transactions fall below traditional finance levels

IF you still view cryptocurrency as the Wild West of finance — a lawless frontier where anonymity shields criminals and illicit funds flow unchecked — you’re clinging to a narrative that has been overtaken by reality.

Far from being a haven for criminals, the crypto industry in South Africa and globally now operates under the same stringent controls as traditional finance, with an added layer of transparency that makes illicit activity even harder to conceal, according to a statement by Luno this week.

Cryptocurrency’s early association with illicit financial flows stems from its anonymous features, which once made it attractive for illegal transactions. A 2013 report by the United Nations Office on Drugs and Crime (UNODC) highlighted Bitcoin’s use on darknet markets like Silk Road, where drugs, weapons, and other illegal goods were traded.

By 2015, research from Europol suggested that up to 40% of Bitcoin transactions were linked to criminal activity.

However, blockchain’s inherent transparency — coupled with tightening regulations — has drastically reversed this trend. Johan Hetzel, the global head of compliance and anti-financial crime at Luno, said: “The idea that crypto is for criminals is not only outdated; it is wrong. Crypto platforms now face the same scrutiny as banks, and in some areas, like the Travel Rule, we’re leading the fight against financial crime.”

Recent data from Chainalysis’s 2025 Crypto Crime Report revealed that illicit transactions now accounted for just 0.14% of all on-chain crypto volumes, down from 0.34% in 2024. By comparison, Global Financial Integrity (GFI) estimates that illicit financial flows in traditional finance — particularly in trade misinvoicing and money laundering — can reach 20% of developing economies’ total trade value with advanced nations.

“Blockchain gives us an unprecedented ability to track transactions,” Hetzel said. “We can spot suspicious activity faster than banks, and once flagged, those transactions are permanently visible on the ledger.”

South Africa has been at the forefront of crypto regulation, requiring exchange platforms such as Luno to register with authorities, verify customer identities, and report suspicious transactions under the Financial Intelligence Centre (FIC) Act. The licensing of crypto firms as financial service providers marks a turning point in the industry’s maturity.

“Strict controls add complexity, but they protect customers and build trust,” Hetzel said. “At Luno, we’ve always operated as if regulated — long before it was mandatory. That approach has positioned us well for institutional adoption.”

The industry now works closely with regulators like the FIC to refine compliance frameworks. This collaboration has been instrumental in reducing crypto-related crime while fostering innovation.

“We expect regulators to keep enforcing rules, including fines for non-compliance,” Hetzel said. “This oversight is vital for market integrity. As crypto grows, we’ll keep raising standards — proving that strong regulation and innovation can coexist.”

With illicit activity at record lows and transparency higher than ever, cryptocurrency is shedding its rogue reputation — and proving itself as a legitimate, secure financial frontier.