How Exactly Do Investigators Follow the Money Trail in Crypto?

Cryptocurrencies, often touted for their pseudonymity and decentralization, have revolutionized the world of finance. However, their association with illicit activities like money laundering, fraud, and ransomware payments has led to increased scrutiny by law enforcement agencies and financial regulators. But how do investigators navigate the complex and opaque world of blockchain transactions to uncover the money trail in crypto? This blog explores the methodologies, tools, and challenges faced by investigators as they trace cryptocurrency transactions.

The Basics of Cryptocurrency Transactions

To understand how investigators trace crypto transactions, it’s crucial to grasp the fundamentals of how cryptocurrencies work.

1. Blockchain Technology

• Cryptocurrencies like Bitcoin and Ethereum operate on blockchain technology, a decentralized ledger that records all transactions.
• Each transaction is logged as a block and linked to the previous one, creating a chain of blocks (hence the name).
• Transactions are immutable and publicly accessible, making them transparent yet pseudonymous.

2. Wallets and Addresses