BSQ Opinion: Why We Expect More Cryptocurrency Prosecutions in the Future
By Roger Sahota, Partner at BSQ and lawyer for Yadi Zhang and Zhimin Qian
At BSQ, we are seeing an increasing number of criminal cases and regulatory investigations involving cryptocurrencies. These types of prosecutions involving cryptocurrency are likely to become increasingly common. The reason is simple: although cryptocurrencies offer a degree of anonymity, every transaction is recorded on the blockchain. And follwing the Zhimn Qian case authorities are increasingly seeing that such actions offer agencies a potential revenue stream for governments.
This creates a paradox. Many people assume Bitcoin is anonymous, but in reality, it is often easier for the authorities to trace than ordinary bank transfers. Once a wallet can be linked to an individual, investigators can follow every transaction that wallet has ever made. Unlike bank records, which require a court order to access, blockchain records are public and available in real time.
Attribution: the key issue
The real challenge for investigators is attribution—linking a wallet or crypto asset to a particular individual. If that link is established, tracing is straightforward.
Attribution is easiest when assets are held on a crypto exchange. Increasingly, exchanges are required to follow the same rules as banks: licensing, strict anti-money laundering (AML) controls, “know your customer” checks, and sanctions screening. In practice, that means exchanges collect detailed personal data and can be ordered to disclose it to the authorities.
Types of crypto prosecutions
In the UK, US and beyond, crypto-related cases typically fall into three categories:
1. AML and compliance failures – High-profile prosecutions include Binance, which was targeted after it failed to keep proper customer records. BSQ has assisted in inquiries where wallets on Binance were frozen while investigators tried to identify their owners.
2. Theft and hacks – The Bybit hack showed how transparent blockchain really is. When hackers stole assets from the exchange, the Bitcoin community tracked the stolen funds live on the blockchain and quickly linked them to the Lazarus Group in North Korea. Even “tumblers” and “mixers” (services designed to disguise the origin of crypto) leave behind transaction trails that can, with time and resources, be followed.
3. Conversion of criminal property – Proceeds of crime are often converted into crypto. Once identified, these assets can be frozen, even if they pass through mixers, and treated like any other criminal property.
Freezing crypto assets
Recent UK legislation has made it easier for prosecutors to freeze crypto wallets. The threshold is low: they need only show “reasonable suspicion” of criminal conduct. These powers extend even to conduct abroad, as long as it would have been unlawful had it occurred in the UK.
If assets are held on an exchange, they can be frozen at the push of a button, and exchanges can be required to reveal the identity of wallet holders. Once attribution is established, every transaction becomes traceable, without the need for cumbersome court orders.
The bigger picture
These developments are making crypto far less attractive to anyone involved in money laundering or other criminal activity. Once a wallet is linked to an individual suspected of crime, it can be flagged in AML databases. Any further transactions trigger alerts, effectively blacklisting the wallet.
Conclusion
The reality is that crypto cases are often easier—not harder—for investigators to build than traditional banking cases. With growing regulatory oversight of exchanges and powerful new freezing powers, we expect to see many more cryptocurrency prosecutions in the years ahead.