Transactions conducted in fiat currency seldom give rise to questions regarding the currency’s origins; however, transactions involving digital assets warrant greater scrutiny. There may be legal ramifications for those who unwittingly possess digital assets like Bitcoin that have been connected to a crime, i.e., “dirty” crypto.
Although a crypto holder or investor may not know their crypto is so tainted, the U.S. government just might. It has become increasingly adept at tracking crypto transactions through tracing analysis.
Over the last few years alone, hundreds of billions of dollars in crypto assets have been used in connection with various crimes and frauds. As such, digital asset holders should be aware of the risks of possessing “dirty” crypto, such as losing assets to the government (subject to a court forfeiture order), frozen digital wallets, and possible devaluation of their “dirty” assets.