The Hidden Danger in Crypto: How You Could Face Criminal Charges

Studies in the United States have found traces of cocaine on 79% of the dollar bills tested. Further research has shown that such contamination can be transferred between bills during everyday use, such as receiving payment at a local store or counting cash; therefore, the mere finding of drug traces does not prove that the owner of the bill was involved in criminal activity.

This comparison helps illustrate a more complex problem in the crypto world. Digital currency can also pass from hand to hand and, at some stage, be linked to a wallet marked as suspicious. However, unlike cash, the blockchain network usually allows for the tracking of transfer history.

Consequently, a person who received a legitimate payment for a service provided to a company might find themselves required to explain why the funds they received were, at an earlier stage, linked to a wallet currently under investigation or listed as associated with criminals or terrorist organizations.

Adv. Rami Tamam points to the intersection of the digital and real worlds as a central risk factor. It is possible to perform transactions using decentralized systems, smart contracts, DeFi platforms, and software that executes automatic actions under pre-determined conditions, sometimes bypassing central exchanges entirely.

However, the moment a person or company seeks to convert crypto into traditional currency, such as shekels or dollars, it usually requires a financial entity that identifies the customer and applies verification mechanisms.

«Exchanges are of great importance because, as their customer, you can transfer the responsibility to them, as they are committed to verifying all their customers, their backgrounds, and their identities. However, even these systems will have to deal with a more complex reality, in which the mere historical connection of a currency to suspicious activity is not necessarily enough to stigmatize every person who received it,» he explains.

The issue becomes particularly sensitive when authorities in one country seek international assistance in an investigation, while the person being investigated claims they simply provided a service and received payment for it.

For crypto users in Israel, the implication is clear: as the financial, technological, and legal worlds converge, the ability to track money becomes more precise, but the responsibility to interpret that information correctly also increases.

The blockchain may record the path, but the path alone does not always reveal who knew what, who was involved, and who simply received a legitimate payment. The great challenge for exchanges, authorities, and legislators will be to ensure that the ability to track money does not automatically turn into the ability to blame everyone through whom those funds passed.