Ever since cryptocurrency exchanges have been thrust into the mainstream light, and have been entrusted with millions of dollars, so the law enforcement across the globe has become more interested and invested. Bitcoin exchanges are still hot spots for scams – be it exit scams or external hackers – and more so, they are places where money laundering and terrorist funding can take place.

It is fair enough that law enforcement wants to know exactly what is going on at these exchanges, and for them to operate in the mainstream, there will need to be compliance with regulators and laws. In fact, the better the relationship with law enforcement and regulators, the more accepted cryptos can become.

Kraken, one of the major exchanges known around the world, has released data around the contact they have had with law enforcement and it shows a significant spike since the same time last year. In fact, law enforcement requests to the exchange are up 49% in the last year.

The USA at the helm

It is probably unsurprising that most of the requests coming from law enforcement are those from an American base. Kraken is a popular exchange in that country, but also, the US’s general attitude towards cryptocurrencies is one of acceptance, but under scrutiny and scepticism.

Kraken received a total of 710 information requests from global law enforcement agencies in 2019, marking a sharp increase as compared with both 475 in 2018 and 160 in 2017. Of these requests, 61 percent came from the US with Denmark and the United Kingdom following.

The US’s requests also were divided between different federal agencies. the FBI accounted for the highest number of requests, 116, followed by the Drug Enforcement Administration, with 73, and Homeland Security Investigations together with Immigration and Customs Enforcement, at 65.

This seems to suggest that there is a lot of concern with buying of illegal drugs with cryptos, with the DEA interested; as well as concerns about funding terrorism as Homeland Security weigh in.

The importance of compliance

Legal compliance within the cryptocurrency space has walked an interesting line. Many got into Bitcoin, a number of years back, as it was the currency of the dark web and could be used fairly anonymously to purchase illegal goods and services.

However, as the space has moved away from its nefarious past, the importance of complying with the law, and ensuring that the law can permeate and monitor the use of the currency for illegal goods is important.