In a rapidly evolving digital landscape, the cryptocurrency arena has found itself in a peculiar paradox. As of July 2025, the rise of fear of missing out (FOMO) and lax regulatory frameworks are inadvertently nurturing what some experts are calling a “crypto crime supercycle.” This burgeoning issue is not just a fleeting concern—it’s a complex tapestry woven from multiple threads of opportunity and oversight.
The Anatomy of Crypto Crime
According to Bill Callahan, a retired DEA agent with a keen eye on digital currencies, the criminal elements lurking in the crypto shadows are anything but novices. He recently shared with Cointelegraph that these bad actors, even when caught in a web of errors, still manage to “make a handsome profit.” It’s a chilling reminder of the resilience and adaptability of cybercriminals in this digital gold rush. This is further exemplified by recent incidents such as the Crypto Exchange GMX Drained of Bitcoin, Ethereum in $40 Million Exploit, highlighting the vulnerabilities that even established platforms face.
What fuels this cycle? It’s a potent mix of FOMO driving investors into the arms of dubious schemes and a regulatory environment struggling to keep pace with innovation. While legitimate platforms and tokens like Ethereum’s Lido and EigenLayer are breaking barriers and leading the charge in decentralized finance (DeFi), the same decentralization offers fertile ground for illicit activities.
Regulatory Gaps and Their Consequences
The regulatory landscape—or lack thereof—is a significant player in this drama. In the United States, efforts to tighten crypto regulations have been sporadic at best, leaving many loopholes for criminals to exploit. It’s a global issue, as countries grapple with the dual challenge of fostering innovation while protecting investors. In China, for instance, authorities have been proactive, as seen in Shenzhen’s warning on stablecoin scams and illegal crypto fundraising, underscoring the need for vigilance in the face of evolving threats.
Callahan notes that the decentralized nature of these currencies makes it difficult to trace transactions, offering criminals the anonymity they crave. “You can’t just walk away with a suitcase of cash anymore, but you can move millions with a few clicks,” he adds. This digital cloak of invisibility is proving hard for traditional law enforcement to penetrate.
The European Union, however, is attempting a more coordinated response with its recent Markets in Crypto-Assets (MiCA) regulation, aiming to bring more transparency and oversight to the industry. But skeptics argue that even these measures may not be enough to stem the tide—raising questions about the effectiveness of current strategies.
The Role of Market Psychology
Beyond regulation and its pitfalls, the psychology driving the market is a compelling factor. FOMO has investors scrambling to get in on the latest token or platform, often without due diligence, creating fertile ground for scams. It’s a classic case of history repeating itself: new technology, unchecked enthusiasm, and the inevitable exploitation.
“People are so eager to jump on the next big thing that they sometimes overlook the red flags,” says crypto analyst Jenna Wright. “It’s as if the collective memory of past crashes and scams vanishes when a new opportunity emerges.”
The allure of high returns can overshadow the inherent risks, and with DeFi platforms offering tantalizing APYs, it’s easy to see why caution is often thrown to the wind. But as history has shown, what goes up can—and often does—come crashing down.
Looking Ahead: A More Secure Future?
As we navigate the rest of 2025, the path forward remains uncertain. Calls for more stringent regulations are growing louder, but the implementation is fraught with challenges. Balancing the need for security with the desire to encourage innovation is a tightrope walk that policymakers worldwide are treading.
In the meantime, the crypto community itself is stepping up, with platforms introducing more robust security measures and education programs to help investors make informed decisions. Will this be enough to turn the tide? Only time will tell.
The crypto crime supercycle, fueled by FOMO and loose regulations, is a wake-up call for the industry. While the road ahead is riddled with obstacles, it’s also paved with opportunities for growth and reform. As we look to the future, one thing is clear: the crypto landscape is set for a seismic shift, and those who adapt will thrive in this brave new world.
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This article is based on: FOMO, lax rules are fueling the crypto crime supercycle
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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.
