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March 27, 2025

Illicit transactions in crypto are now significantly lower than in traditional finance

If you still view the crypto industry as the Wild West, you have missed a key shift in South Africa and many countries globally. The industry now has the same controls as traditional finance but with additional tools that allow for greater transparency, making financial crime more difficult.

"The idea that crypto is for criminals is not only outdated, it is wrong. In reality, crypto platforms face the same scrutiny as traditional financial institutions from an anti-money laundering and counter-terrorist financing perspective. Some might argue that we are leading the financial industry in some areas, like the recent Travel Rule regulation," says Johan Hetzel, Global Head of Compliance and Anti-financial Crime at Luno, South Africa’s *leading crypto platform.

Blockchain technology makes almost all transactions traceable, and conventional financial systems cannot match its inherent transparency. Recent data from Chainalysis's 2025 Crypto Crime report, which demonstrates the effectiveness of current control measures, reveals that illicit transactions account for just 0.14% of all on-chain (crypto) transaction volumes—down from 0.34% reported in 2024.

According to Global Financial Integrity, this is significantly lower than traditional finance, with some estimates of illicit financial flows as high as 20% of developing economies’ total trade value with advanced economies.

"We can see and track transactions with much greater detail than banks, and the blockchain gives us better tools to spot and stop suspicious activity," says Hetzel.

South African crypto companies must comply with strict rules. They must register with authorities, verify customer identities, and monitor transactions. These requirements match those of traditional financial institutions. All must comply with anti-money laundering and counter-terrorist financing legislation, including reporting suspicious transactions.

The industry has evolved dramatically over the past decade, transforming from its early reputation for being anti-regulation into a sector where transparency and control are paramount. This evolution has been particularly evident in South Africa with the licensing of qualifying crypto companies as financial service providers, marking a new era of industry maturity.

But these licenses come with tough conditions.

"Yes, strict controls make things more complex. But they protect customers and build trust. At Luno, we've always worked as if we were regulated, even before formal rules existed. This approach has positioned us well for the new regulatory environment and the increasing institutional interest in crypto," Hetzel explains.

The crypto industry regularly meets with regulators like the Financial Intelligence Centre to discuss and shape rules. This helps both established companies and newcomers understand their obligations. The combined efforts by regulators and crypto businesses have had a massive impact on curbing illicit activity in the industry.

"We expect regulators to maintain their active stance on enforcement, including issuing fines to non-compliant entities. This level of oversight is crucial for maintaining market integrity and protecting consumers.

“As crypto grows, platforms like Luno continue to raise standards and demonstrate how robust regulatory frameworks can support innovation while ensuring consumer protection in the evolving crypto landscape. Luno engages with regulators and law enforcement, and we share learnings from the different jurisdictions where we operate,”  adds Hetzel.

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