For all the hype of recent years, the crypto-asset sector does not have a history of showing itself in the best light.

From its genesis in 2009, bitcoin (BTC) was quickly appropriated by criminals intent on making it their currency of choice for prohibited goods. While public-facing responses by governments telegraphed an air of unconcern, internal reactions were quite different. In the early 2010s, I sat in meetings with intelligence professionals muttering about darknet markets using invisible funds that were impossible to trace. This sort of thing tends to put law enforcement on edge, and so it remains.

Joby Carpenter is the Association of Certified Anti-Money Laundering Specialists' global subject matter expert in crypto assets, illicit finance and emerging threats, with 20 years of experience in strategic policy making. This article is part of CoinDesk’s Sin Week.

The perception that crypto is under the sway of criminals has never gone away despite data indicating that illicit activity is at an all-time low compared with legitimate usage. As the application of crypto assets has expanded to include an array of services typically conducted by the traditional financial sector, institutional takeup has grown alongside public adoption and the volume of illegal crypto-transactions has declined proportionally.

The reasons for this shift are structural. It turns out that money laundering, long a primary concern of financial regulators, is harder to do in the crypto sector than we once believed.

For one, crypto’s traceability is a consequence of the fact that blockchain technology serves as a public ledger mapping transactions on a global scale – a function that law enforcement now sees as invaluable.

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Criminals also face mundane barriers to adoption, including the question of whether low liquidity and price volatility make crypto worth the trouble. In many ways, the risks of the sector are looking more and more like those of cash.

It often seems as if crypto is supportive of crime, or at least neutral to it. And in cases where regulations are followed, founders might best be called reluctant good citizens. Profit seems to be the ultimate guiding principle, not compliance or safety.

Celsius Network, Three Arrows Capital and, most strikingly, Terra have all been brought to ground by dubious business models, questionable working practices and a “profit-first” attitude. This has emboldened skeptics who loudly decry crypto assets as a Ponzi scheme or, at best, a solution in search of a problem.

Yet, glimmers of a broader acceptance can still be found. As recent headlines have noted, crypto platforms have facilitated humanitarian funding to Ukraine and Afghanistan. Human-rights advocates have lauded the technology for providing payment rails in unstable economies. Even non-fungible tokens (NFT) have been praised for protecting vulnerable individuals.

This raises the question: Will the crypto sector’s most prominent figures – the individuals sometimes pejoratively described as “crypto bros” – be willing to abandon their laissez-faire attitudes and embrace governmental expectations?

Because if not, it is reasonable to assume the industry’s rocky relationship with law enforcement and regulators won’t be improving soon.

For an example of this, consider the industry’s difficulties meeting registration requirements under national anti-money laundering (AML) laws. While the steps for registration are typically simple, some firms have failed to take them in the apparent belief that they should not be obligated to comply with such rules on a global scale, particularly if the regulations vary across jurisdictions.

It’s a problem of the industry’s own making and one that has not gone unnoticed by regulators or the banks that serve as counterparties to cryptocurrency exchanges. In other words, without a course correction more crypto firms will fail when they could have stayed solvent by investing in their AML controls.

That isn’t an inevitability, however. Crypto-asset providers can come in from the cold of the “crypto winter” and demonstrate that they can make the technology both functional and safe.

What can the sector do to improve its standing? Implementing a top-down compliance culture, adequate training and strong risk management controls can ameliorate concerns, though more may be needed to address the damage already done.

To better engage with supervisors, firms should consider testing and validating business models through government-led sandbox exercises that allow for two-way dialogue. Companies should also make clear that they will share intelligence on fraud, market abuse and money laundering threats with regulators and their competitors whenever possible.

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Market abuse should be treated as a serious threat from organized crime groups and not merely a problem created by unsophisticated opportunists.

Another piece of advice for crypto firms: Stop shielding your products with caveat emptor (buyer beware). If market conditions require tweaking your business model, update your financial-crime risk appetite to reflect that reality. Regulators will appreciate it.

More than anything, the industry should consider whether it wishes to continue to be associated with the Silk Roads of the world or embrace its inherent ability to trace illicit funds and fight financial crime.