Money laundering has long been a scourge of the cryptocurrency sector, and the industry has a new answer meant to demonstrate it can head off major problems before they accelerate: the Beacon Network.
The new system of illicit-activity alerts, which has been building behind the scenes under the management of TRM Labs, is now officially operational under a broad coalition of law enforcement agencies, exchanges, analysts, individual crypto sleuths and digital assets issuers. Exchanges such as Binance, Coinbase and Kraken have joined issuers and freelance investigators to share real-time information about bad actors, potentially offering an answer to several government efforts to clamp down on costly abuses, TRM announced on Wednesday.
As U.S. regulators and Congress actively write legislation and new rulebooks to remedy what's arguably the industry's worst reputational challenge — anti-money laundering controls — TRM Global Head of Policy Ari Redbord said the bad guys are getting "faster and faster."
"We need this ecosystem to be locked down, and we need it to be locked down in real time," he told CoinDesk in an interview.
As long as North Korean hackers can rip off more than $1 billion and launder it faster than the industry can respond, the crypto ecosystem is in trouble, Redbord said. The massive recent theft from the Bybit exchange served as a wakeup call.
'Real-Time interdiction'
Beacon, which has already started work identifying a few cases that TRM couldn't yet discuss, is designed as a "real-time interdiction network" where membership is non-commercial and doesn't require any existing business relationships between members. The system is supposed to quickly highlight addresses connected to threats and trigger alerts to block bad actors from cashing out illicit assets from scams, frauds, hacks and criminal activity.
“There’s no program like Beacon Network,” said Valerie-Leila Jaber, global head of anti-money laundering at Coinbase, in a statement. “It’s a true early-warning system that helps us identify and freeze illicit assets so law enforcement can recover them."
The network's inaugural membership features the prominent exchanges and also includes such names as Robinhood, Ripple, Crypto.com, OKX, Poloniex, Anchorage Digital and payments firms PayPal and Stripe.
The list of involved companies is extensive and represents the vast majority of global crypto activity, though missing from the current list are leading stablecoin issuers Tether and Circle. And while TRM assures that most of the key law enforcement entities in the U.S. and around the world are participating, the company said it's unable to name them just yet, apart from the Australian Federal Police.
There's some precedence in the realm of traditional finance (TradFi) for public-private intelligence sharing about bad actors, including at the Treasury Department's Financial Crimes Enforcement Network (FinCEN), which runs the FinCEN Exchange for trading information.
Automated
The crypto sector's project doesn't have a dedicated staff beyond the compliance and investigative personnel already at the involved companies, led by TRM's Chris Wong, an ex-FBI crypto investigator. The network will rely on automation for round-the-clock alerts and transaction delays, which will be followed up by human investigators. The automation is necessary, Redbord said, because the bad actors seek to strike when they're least likely to be spotted.
"They don't sleep, and they know exactly when we are sleeping," he said.
President Donald Trump has directed his administration to make crypto a top policy priority, and it recently issued a report and recommendations on how to tackle that task, including a directive "encouraging domestic and cross-border information sharing, greater participation in sharing programs by digital asset financial institutions and improved information sharing between digital asset and traditional financial institutions."
The current draft of a U.S. Senate bill to regulate the crypto markets includes a section on illicit finance that also considers a path for agencies to "securely share information about potential illicit finance violations and threats and emerging risks." And the recently passed Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act spurred the U.S. Treasury Department to open a comment period this week encouraging the public to submit new ideas for addressing illicit crypto usage.
"This is absolutely the answer to how we can do anti-money laundering and illicit finance investigations way better in crypto," Redbord said.
He said the network will also delve into artificial intelligence to analyze so-called "pig butchering" networks and criminal cartels to potentially be able to anticipate their strategies. And it'll tap independent crypto sleuths such as ZachXBT to raise their own flags.
"There's no ZachXBT for TradFi," he said.
