In the past, when we were using a big computer to access the Internet, we are exploring and developing more digital technologies that we could think of. Now we are in an era when digital assets are a common thing. Individuals, companies and large organizations are also involved in digital assets like Cryptocurrency. In this digital world, cryptocurrencies are promising to enhance anonymity and decentralized control over financial transactions. According to the authors Alnıpak and Toraman, this blockchain technology offers many benefits for improving transactional efficiency, transparency and security as seen in applications ranging from supply chain logistics to international payments (Alnıpak & Toraman, 2024). However, this technology also has its bad side as well. This paper will be investigating all the roles of cryptocurrency in the financial privacy and cybersecurity aspects. As on-chain crime becomes increasing, the total value received by illicit cryptocurrency addresses reached an estimated $40.9 billion in 2024, this underscores the scale of the problem (Chainalysis, 2025, p.4). We will be exploring the features of blockchain technologies that protect the user privacy and how cryptocurrencies are used in illegal activities
This paper will provide all the aspects and argue that the cryptocurrency’s blockchain technologies give to human society a benefit in financial efficiency and user control. The core features of pseudonymity, decentralization and the regulatory environment create risks for financial privacy as well as cybersecurity. These risks are not only in global fraud and money laundering operations but also involved in corporate/organizations wrongdoing. This paper will outline the technological promise of blockchain, then go deeper into the complex legal and ethical issues that we are currently facing. Finally, we will provide a detailed analysis of the security risks that cryptocurrencies pose to individuals, organizations, and the financial system.
Cryptocurrency is related to the blockchain technology. Unlike traditional finance, where a bank validates transactions, a blockchain is maintained by a distributed network of participants. Each block in the chain contains several transactions and every time a new transaction occurs, it is recorded to every participant’s ledger. This distribution is achieved through processes like mining or staking, it is the fundamental nature of the cryptocurrency. Cryptocurrencies are operated independently from traditional financial institutions (Alnıpak & Toraman, 2024).
Cryptocurrencies are also integrating into many other industries. Blockchain offers a way to streamline payment transactions, reduce paperwork, and build trust between parties who may have never met (Alnıpak & Toraman, 2024). With all the benefits and efficiency of blockchain technologies, this is a key driver of adoption. However, the foundational principles of this technology—decentralization and pseudonymity—are introducing many risks and challenges to the digital world.
With the rapid rise of cryptocurrencies, they also bring many problems and concerns. Especially with the legal, ethical and social aspects. Governments worldwide are trying to regulate this technology. The tension is palpable between the desire of some users for complete financial anonymity and the legal mandates for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance imposed on traditional financial institutions to prevent illicit activities. With the pseudonymous nature of cryptocurrencies that brings privacy. It also creates challenges for law enforcement in finding cybercriminals and tax evaders.
To understand why cryptocurrency is a new way for criminal to conduct transactions. The authors Wang and Hsieh provide a useful criminological theory/framework known as the money laundering triangle to understand why cryptocurrencies are so attractive for illicit use. The framework posits that a crime occurs when there is a convergence of motivated offenders, suitable instruments, and inadequate guardianship. Cryptocurrency satisfies all three conditions.
First, motivated offenders are constantly finding a new way to move and obscure funds. The Chainalysis (2025) reports highlights a diverse array of these actors, coming commonly from Cyberattack such as from the ransomware gangs, and including many cybercriminals that involved in darknet market vending and organized crime syndicates. Second, the cryptocurrency serves as a uniquely suitable instrument. Its decentralization means there is no central points of control, and the technologies gives the ability of pseudonymity that allows for a high degree of anonymity. Tools like crypto mixers and privacy coins are used to further obfuscate the trail of funds. For instance, after the $305 million hack of DMM Bitcoin, attackers used a Bitcoin CoinJoin Mixing Service before moving the funds through other services (Chainalysis, 2025, p.84). Third, the current global landscape provides inadequate guardianship. The gap in regulations allows criminals to exploit jurisdictional loopholes. This combination of factors, as Wang and Hsieh (2024) argue, makes cryptocurrency almost a perfect tool for modern money laundering, as well as a host of other types of crimes.
While cryptocurrencies offer new ways to handle money, they also bring a lot of security concerns for both users and the company/organization. Criminals have a new “legal” way to protect themselves from exposure because the pseudonymous nature of cryptocurrencies brings the privacy. Mehta and Chawla (2024) categorize these risks into “barriers” to legitimate use (such as technical complexity and lack of trust) and “illegal usage”. Their research confirms that criminals are using it for illegal activities like money laundering, and it is hard for authorities to follow the money compared to the traditional bank transfer. For normal users, keeping cryptocurrencies is something that we would think it is an easy task. However, this is also a favorite place for hackers to steal the funds. If you are not lucky and get your funds stolen, it is impossible to get them back because of the nature of the cryptocurrency’s technologies.
The anonymity of cryptocurrencies technologies has increased manipulative scams. An example is the “pig butchering” fraud, an incident that happens when criminals use social engineering to build long-term trust with the victim before convincing them to invest large sums of money into a fraudulent cryptocurrency platform (Burrell, 2025). In this attack, cryptocurrency is the primary tool for the final “butchering”, because of the pseudonymous nature of the transactions makes the stolen funds nearly impossible to recover. This example shows how cybercriminals use both human psychology and technology to cause the financial and mental harm. The “pig butchering scam”, which saw its revenue grow by nearly 40% year-over-year in 2024 (Chainalysis, 2025, p.58)
These scams also show a sophistication that emerging “scam as a service” ecosystem. Platforms like Huione Guarantee, a marketplace that tied to a Cambodian conglomerate, provide criminals with the tools they need to plan and execute these frauds at scale. These activities include selling targeted data lists, web hosting services, and even using Generative Artificial Intelligence software that could create a fake personas and realistic content to trick victims into making fraudulent investments (Chainalysis, 2025, p. 63-64). This type of fraud demonstrates a convergence of psychological manipulation and advanced technology, and it involves with cryptocurrency serving as the final, irreversible method of extraction.
The dangers of cryptocurrency are no longer limited to the digital side. The Chainalysis (2025) report a rise in cases where criminals use violence to force crypto transfer. These attacks fall into two categories: opportunistic street crimes, where a stolen phone reveals a crypto wallet, and targeted attacks on high-net-worth individuals. In one notable incident, seven members of a UK gang were sentenced for kidnapping and torturing a crypto investor over several months to extort his funds. In another incident, the co-founder of the hardware wallet brand Ledger was kidnapped from his home and held for ransom (Chainalysis, 2025, p.133). These incidents show that the perceived wealth stored in crypto wallets is making individuals physical targets, blurring the line between cybersecurity and personal safety.
Businesses and other institutions are not exception. They are also facing a lot of attacks. In 2024 alone, $2.2 billion was stolen from crypto platforms through hacking incidents (Chainalysis, 2025, p.75). These attacks are often carried out by state-sponsored groups, such as those from North Korea, who use stolen funds to finance weapons programs. As Nkambule et al. (2025) note, organizations struggle to develop a robust cybersecurity frameworks to defend against such threats, which often exploit vulnerabilities in smart contracts or through the compromise of private keys.
Beyond external threats from criminals, cryptocurrency and blockchain technology also introduce internal and institutional risks. Luo, Fang, Li, and Chen (2024) identify a form of "managerial opportunism," where companies may adopt blockchain technology not for its functional benefits but using to capitalize on market "hype." By announcing a pivot to blockchain, managers can potentially inflate their stock price and mask poor underlying performance, thereby increasing corporate default risk and misleading investors.
For legitimate organizations, they are also trying to protect their digital environment against these new threats is a difficult task. As explored by Nkambule, van Vuuren, and Leenen (2025), institutions face challenges in developing robust cybersecurity frameworks to protect sensitive data. With the rise of malware and phishing attacks that add another layer of complexity, it is requiring a level of user knowledge and institutional awareness about the current digital criminal world, which as Mehta and Chawla (2024) note, is often lacking.
We cannot deny the benefits of cryptocurrency that brings to human society and solves many problems in traditional financial institutions. However, it also has their negative aspects in financial privacy and cybersecurity. We are already exploring blockchain technologies that provide users with pseudonymity and control over their financial data, and this also creates more opportunities for more illegal activities for criminals. We also discussed that these risks include not only those from individuals or groups but also from companies/organizations that use cryptocurrencies for illegal activities. It requires more development of robust institutional cybersecurity frameworks and enhanced digital knowledge for all users. Without acknowledging and having a proactive solution for these problems, we risk allowing the transformative potential of cryptocurrency to be overshadowed by the threats that cybercrime poses.
Alnıpak, S., & Toraman, Y. (2024). Analysing the intention to use blockchain technology in payment transactions of Turkish maritime industry. Quality and Quantity, 58(3), 2103-2123. https://doi.org/10.1007/s11135-023-01735-3
Burrell, D. N. (2025). Mental health impacts of cybercrime. Reading: Academic Conferences International Limited. Retrieved from http://mutex.gmu.edu/login?url=https://www.proquest.com/conference-papers-proceedings/mental-health-impacts-cybercrime/docview/3202190860/se-2
Chainalysis. (2025, February). The 2025 crypto crime report. https://www.chainalysis.com/reports/2025-crypto-crime-report/
Luo, Y., Fang, M., Li, A., & Chen, S. (2024). Opportunity or opportunism? Blockchain technology adoption and corporate default risk. Humanities & Social Sciences Communications, 11(1), 1360. https://doi.org/10.1057/s41599-024-03727-6
Mehta, K., & Chawla, S. (2024). Illuminating the dark corners: A qualitative examination of cryptocurrency’s risk. Digital Policy, Regulation and Governance, 26(2), 188-208. doi:https://doi.org/10.1108/DPRG-10-2023-0147
Nkambule, M., van Vuuren, J. J., & Leenen, L. (2025). Identifying cybersecurity elements for a cybersecurity framework in higher education. Reading: Academic Conferences International Limited. Retrieved from http://mutex.gmu.edu/login?url=https://www.proquest.com/conference-papers-proceedings/identifying-cybersecurity-elements-framework/docview/3202190627/se-2
Wang, H., & Hsieh, M. (2024). Cryptocurrency is new vogue: a reflection on money laundering prevention. Security Journal, 37(1), 25-46. https://doi.org/10.1057/s41284-023-00366-5