The Role of International Law to Tackle the Dark Side of Cryptocurrencies

Introduction

The old proverb says there are two sides to every coin. The same can be said of cryptocurrencies. For supporters, cryptocurrencies challenge the traditional monetary system dominated by governments, central banks, and commercial banks. They can reduce transaction fees, improve payment speed, and potentially expand financial inclusion.

Yet cryptocurrencies also have a darker side. Their speed, cross-border reach, and potential anonymity can make them attractive for criminal misuse. These features raise concerns about money laundering, ransomware, terrorist financing, fraud, and regulatory evasion.

This article asks how international law and global regulatory cooperation can respond.

What Are Cryptocurrencies?

Unlike fiat currencies issued by central banks, cryptocurrencies are typically decentralised digital assets operating through blockchain technology. There is no universally accepted international legal taxonomy for cryptocurrencies, and regulators classify them differently depending on their features.

They may function as:

• Means of payment

• Investment assets

• Fundraising instruments (such as token offerings)

• Stablecoins linked to national currencies or commodities

• Government-recognised tender, as when El Salvador adopted Bitcoin as legal tender

Because cryptocurrencies vary so widely, regulation is often fragmented.

Financial Crime Risks

The author argues that gaps in national regulation create opportunities for criminals.

Examples include:

Ransomware

The WannaCry ransomware attack used malicious software to lock computer systems and demand payment in Bitcoin. Victims worldwide—including hospitals and businesses—were affected.

Criminals can move illicit proceeds through multiple wallets and exchanges, convert one token into another, and then cash out into fiat currency.

Money Laundering

Where exchanges have weak customer due diligence or poor identity verification, cryptocurrencies can be used to conceal illicit funds.

Terrorist Financing

Peer-to-peer transfers without regulated intermediaries may allow financing networks to move value outside conventional banking controls.

Stablecoin Risks

Mass adoption of stablecoins may create new systemic and anti-money laundering challenges if widely used without effective oversight.

Why International Law Matters

Cryptocurrency activity is inherently transnational. A wallet may be controlled in one country, hosted through infrastructure in another, and used to transfer funds globally within minutes.

No single national regulator can effectively control these risks alone. The article therefore focuses on international standard-setting bodies.

Existing Global Institutions

There is no single specialised international organisation for cryptocurrency regulation. Instead, responsibility is spread across multiple bodies:

• Financial Action Task Force – anti-money laundering and counter-terrorist financing standards

• Basel Committee on Banking Supervision – prudential bank regulation

• International Organization of Securities Commissions – securities markets regulation

• Egmont Group – intelligence sharing

• INTERPOL – international law enforcement coordination

• Financial Stability Board – global financial stability monitoring

Proposed Multi-Agency Approach

The author argues that because no single institution governs crypto globally, the solution should be coordinated multi-agency governance.

That system would involve:

Rule-Making

FATF, Basel Committee, IOSCO, and FSB developing harmonised standards.

Intelligence Sharing

Egmont Group facilitating suspicious transaction intelligence among states.

Enforcement

INTERPOL and domestic authorities pursuing transnational crypto-enabled crime.

Regional Implementation

FATF-style regional bodies adapting standards locally.

Private Sector Involvement

Banks, exchanges, and payment firms improving compliance systems.

Regulatory Arbitrage

A major concern is regulatory arbitrage—where businesses or criminals exploit differences between legal systems.

Examples:

• Operating from lightly regulated jurisdictions

• Structuring products so they avoid classification as securities, banking products, or payment systems

• Moving operations between countries to evade enforcement

The article notes debates in the United States, where some crypto products may resemble securities (falling under the Securities and Exchange Commission), while others resemble banking products supervised by different agencies.

Without harmonised global rules, criminals can exploit these gaps.

Conclusion

The article recognises the benefits of cryptocurrencies—especially lower transaction costs and broader access to finance—but stresses that these advantages come with serious risks.

Because crypto markets operate globally, fragmented national responses are insufficient. International law should respond through coordinated action among existing institutions rather than waiting for a new specialised body.

The author’s central message is that only a cooperative international framework can reduce:

• financial crime

• regulatory arbitrage

• illicit money flows

• enforcement gaps

Without such coordination, the dark side of cryptocurrency may continue to outpace regulators.

Juan Carlos Portilla is an international law professor at Universidad de La Sabana with expertise in anti-money laundering and financial crime compliance.