Crypto scams soared to a staggering $9.9 billion in 2024, and with 90% of UK crypto apps flunking anti-money laundering (AML) checks, the need for robust data-sharing frameworks is more pressing than ever. Industry insiders and regulators alike are eyeing data collaboration as the next big step in crypto compliance, aiming to combat fraud and restore trust in digital currencies.
The Data Dilemma
Data sharing in the crypto sphere isn’t just a buzzword—it’s a burgeoning necessity. As digital assets continue to gain traction, the lack of transparency and accountability remains a thorn in the side of regulators. According to Jane McCarthy, a noted blockchain analyst, “We’re at a pivotal moment. Data sharing could be our strongest weapon against fraud, but it requires unprecedented cooperation across the industry.”
The hurdles are significant. Many platforms are reluctant to share data due to privacy concerns and the fear of losing competitive edge. Yet, the potential benefits are hard to ignore. Enhanced data sharing could lead to more effective tracking of illicit activities, ultimately reducing the staggering losses from scams. Last year’s eye-watering $9.9 billion lost to fraudsters serves as a stark reminder of the stakes involved.
Regulatory Pressure Mounts
The regulatory landscape is evolving rapidly. Financial watchdogs worldwide are tightening the noose, demanding more stringent compliance measures. In the UK, the failure rate of crypto apps in passing AML checks—an alarming 90%—highlights the inefficiencies plaguing the system. “The figures are concerning,” says Tom Harris, a former financial regulator. “Without proper data sharing mechanisms, it’s like fighting with one hand tied behind our back.” This sentiment echoes recent enforcement actions, such as the NYDFS fining of Paxos $26.5M for compliance failures, underscoring the urgent need for reform.
This increased pressure is spurring some companies to consider industry-wide data-sharing initiatives. The challenge? Creating systems that respect user privacy while providing enough transparency to deter fraudulent activities. Balancing these needs is proving tricky, yet crucial for the industry’s future.
A Collaborative Approach
Some forward-thinking platforms are already taking steps toward collaboration. Take Lido and EigenLayer, for example, which have initiated talks about forming alliances to improve data transparency. These discussions highlight a growing recognition that collective action could pave the way for more robust compliance frameworks. This aligns with broader regulatory efforts, as seen in the SEC’s Crypto Task Force touring the U.S. to engage with startups on policy reform, aiming to shape a more cohesive regulatory environment.
However, the industry remains divided. Critics argue that without clear regulations and standards, data sharing could lead to unintended consequences, including breaches of privacy and potential misuse of data. “We’re walking a fine line,” warns blockchain legal expert Sarah White. “The potential for misuse is real, and we must tread carefully.”
Looking Ahead
As we gaze into the future, questions about the feasibility and effectiveness of data-sharing initiatives remain. Will the industry come together to forge a path forward, or will fragmentation continue to stymie progress? The stakes couldn’t be higher. Crypto’s credibility and survival may hinge on how these questions are addressed.
The coming months will be telling. With regulators tightening their grip and industry leaders exploring new collaborative models, the crypto world is at a crossroads. Whether data sharing becomes the panacea for its compliance woes or another complex challenge remains to be seen. One thing is certain: the conversation is far from over.
Source
This article is based on: Data sharing is the next crypto compliance frontier
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
