Prospects for the use of artificial intelligence within the boundaries of privacy and security of cryptocurrency market participants

Yakovleva Elena Olegovna ORCID: 0000-0003-1733-3904 PhD in Law Associate Professor; Department of Criminal Law; Southwestern State University 94, Fifty Years of October str., Kursk, Kursk region, 305040, Russia pragmatik-alenka@yandex.ru Other publications by this author

Gorbacheva Tat'yana Igorevna Postgraduate student; Department of Criminal Law; Southwest State University 94 Fifty Years of October str., Kursk, Kursk region, 305040, Russia tanya.gorba4yova2017@yandex.ru

The current volume of cryptocurrency transactions related to illegal activities in the world is comparable to several tens of billions of dollars. The rise of decentralized finance (DeFi), anonymous wallets, and NFT scams has turned blockchain into a "new shadow" of the global economy. There are lively discussions, the subject of which are diverse positions: is technology itself an instrument of crime or just a mirror of the systemic flaws of traditional institutions? It is well known that total control over the blockchain kills its essence — freedom from censorship. But if law enforcement agencies fail to "freeze the wallet" of a terrorist, society will pay with its lives. Therefore, cryptocurrency crime requires not prohibitions, but a rethinking of the law. The threat is not technology, but its exploitation in conditions of legal inequality. As Satoshi Nakamoto wrote, "Bitcoin is freedom, but there is no freedom without responsibility." That is why scientific research in the field of the development of the cryptocurrency market is so important today for both the science of criminal law and criminology.

The methodological basis of this work was the method of dialectical cognition, thanks to which it was possible to study the object and subject of research in relation to the norms of domestic criminal legislation and other normative legal acts. The theoretical and methodological basis of the research is also represented by various logical techniques and means of scientific knowledge, general scientific and private scientific methods, among which modeling, forecasting and the formal legal method are the most widespread. For example, using the forecasting method, it was possible to formulate a conclusion about further improvement of the mechanisms of criminal behavior using cryptocurrencies, which poses a threat to the stability of the financial system and poses threats to Russia's national security. This requires the development of modern, no less technologically advanced techniques and methods of preventive action on the part of law enforcement officers. In the combined use of the methods under consideration, the authors attempted to assess the natural essence of cryptocurrencies by referring to modern scientific views on this phenomenon, analyze the current state of its legal regulation, identify problems in this area, followed by practical recommendations on the use of modern means of preventing crime committed using cryptocurrencies in Russia. The use of the methodology in the proposed format, combined with an analysis of a number of basic doctrinal provisions, as well as judicial practice, led to the conclusion that legislative regulation of cryptocurrencies is necessary.

Financial relations at the present stage of development of Russian society are in a difficult situation, but despite the sanctions imposed by individual countries, they continue their steady development. New financial instruments are emerging. Thus, the emergence of the first cryptocurrency, Bitcoin, marked the beginning of a new era in the financial sector. In 2008, Satoshi Nakamoto published an article in which he described the concept of a decentralized digital currency based on blockchain technology. Already in January 2009, the Bitcoin network began its work, providing users with the opportunity to carry out transactions without intermediaries. The main purpose of Bitcoin's creation was to eliminate dependence on traditional financial institutions, as well as to ensure transparency and security of financial transactions. This was made possible by the innovative approach to data storage and verification offered by the blockchain. Nowadays, the concept of "cryptocurrency" has become an integral part of our lives. The cryptocurrency exchange rate changes daily, especially taking into account the ongoing events related to the political decisions of individual countries in the tense conditions of trade interaction.^[1]

Using blockchain technology, Bitcoin offered a decentralized way to carry out transactions that did not require the participation of third parties such as banks. This innovation was supposed to allow users to exchange funds directly, ensuring transparency and security of operations. In the early years, Bitcoin was used mainly by enthusiasts and programmers, but as its popularity grew, it began to attract the attention of a wider audience, including investors and entrepreneurs. Its appearance laid the foundation for the further development of the cryptocurrency market and inspired the creation of many new digital assets.

After the success of Bitcoin, alternative cryptocurrencies began to appear, known as altcoins, which sought to improve or complement the functionality of the first cryptocurrency. Among them, Ethereum stands out, offering a platform for creating smart contracts, and Ripple, focused on international payments. In 2017, the cryptocurrency market was accompanied by the appearance of Initial Coin Offering (ICO), a way to raise funds for new projects through the issuance of tokens. In addition, the development of decentralized finance (DeFi) has opened up new opportunities for using cryptocurrencies, including lending, exchange, and insurance without the involvement of traditional financial institutions. These events probably contributed to the strengthening of the cryptocurrency market and the expansion of its application.

Modern cryptocurrencies represent a wide range of digital assets, differing in functionality and scope of application. One of the most significant among them is Ethereum. This platform introduced the concept of smart contracts, which enabled developers to create decentralized applications (dApps) using blockchain technology. Smart contracts are automated programs that are executed under pre-defined conditions, which makes transactions more transparent and reliable. Decentralization, as one of the experts notes, "is a key aspect of cryptocurrency, it ensures the security and anonymity of transactions." ^{[2, p. 352]} Therefore, Ethereum has become the basis for many innovative projects, including decentralized financial systems (DeFi) and non-interchangeable tokens (NFT). Otherwise, the main principle of the blockchain is decentralization: data is stored on multiple network nodes, which eliminates the need for central authorities. This makes the system resistant to attacks and failures, as information is stored on each node. The blockchain uses cryptographic methods to ensure data integrity and protect against unauthorized access. Each record in the blockchain is linked to the previous one, forming a chain of blocks where transactions are confirmed by network participants using consensus algorithms. These features make blockchain a reliable and transparent technology that finds applications not only in cryptocurrencies, but also in other areas such as finance, logistics, and healthcare. Let's consider certain types of blockchains.

Public blockchains are distributed networks that are open to all users. Anyone can join the network, participate in the transaction confirmation process, and support its operation. However, such a structure requires significant resources to function, especially on large networks such as Ethereum, which supports thousands of decentralized applications, including financial and gaming platforms. This makes public blockchains an ideal choice for applications where trust and openness are important.

Private blockchains are characterized by limited access, which allows only certain users to participate in the network and confirm transactions. This approach provides organizations with control over access to data and guarantees confidentiality, which is especially important for corporate and government applications. The advantages of private blockchains include higher performance and lower network maintenance costs compared to public ones. However, limited decentralization can reduce the level of trust in such systems, as they depend on the reliability of the managing organization. An important aspect is that "cryptocurrencies do not have the status of legal tender in any jurisdiction, are not issued or guaranteed by any state, and perform all or some of the functions of money, but only by agreement between users within their Internet network." ^{[3, p. 458]} This highlights the importance of trust in the context of the use of private blockchains and their dependence on specific participants.

Consortium blockchains are an intermediate option between public and private blockchains. They are managed by a group of organizations, which allows them to distribute responsibility and increase the level of trust between the participants. Such blockchains are used in various industries, including banking and logistics, where the collaboration of several stakeholders is required. Consortium blockchains combine the advantages of private networks, such as privacy and high performance, with elements of decentralization, making them an attractive solution for many organizations.

The main feature of cryptocurrencies is their independence from the activities of companies or states, which means they do not have physical collateral, for example, unlike shares, which represent a stake in a company, where their value depends on the financial condition of the issuer and market conditions. The decentralized nature of cryptocurrencies and their value, determined by supply and demand in the market, make these assets more volatile. The market capitalization of cryptocurrencies is sometimes comparable to the capitalization of the world's largest companies. This highlights the significant interest of investors in the latter, despite their instability.

The volatility of cryptocurrencies is one of the key characteristics that distinguish them from traditional financial instruments. This makes cryptocurrencies attractive to traders seeking high profits, but at the same time increases the risks for long-term investors. The high volatility is due to several factors, including limited supply, speculative interest, and lack of centralized regulation. These aspects emphasize the need for careful analysis and a careful approach when dealing with cryptocurrencies. In the fair opinion of L.V. Sannikova, "it seems relevant to identify the risks of cryptocurrencies in relation to the Russian financial market and consider ways to minimize them." ^{[4, p. 126]} However, there are also points of view that associate cryptocurrency with a separate instrument of criminal influence. Many works of Russian scientists and specialists in the field of criminal sciences are devoted to this topic, for example, S.A. Sukhanov ^[13], V.V. Smolin ^[14], I.V. Poddubny ^[15], D.S. Zinchenko ^[16]. In turn, A.V. Amenitsky, I. V. Rukhovicha, L. A. Amenitskaya, D. A. Amenitsky correctly considered cryptocurrency as a source of threat to cybersecurity ^[17]. At the same time, despite the traditional approach of many authors that technology is "to blame" for the development of crime, we tend to disagree with them, because the reason may primarily be the imperfection of the law. Therefore, first of all, cryptocrime should be regarded as a socio-economic, not a technical problem.

The liquidity of the cryptocurrency market is a key aspect that determines its attractiveness to participants. It may vary depending on the specific cryptocurrency and the current market situation. For example, popular cryptocurrencies such as bitcoin and ether have significantly more liquidity compared to lesser-known altcoins. The liquidity of the cryptocurrency market is an important factor to consider when investing.

The decentralized blockchain model has opened up a whole space for a variety of criminal elements. The shadow exchange actively uses such means of payment. The problem in the form of instability of an individual coin loses its primary importance, because at a specific point in time, namely, when making a transaction, the cryptocurrency has a monetary dollar equivalent with the possibility of transfer, sale and further cashing. Despite the significant risks of the described processes, the issue of regulatory regulation of cryptocurrencies is still open. An analysis of individual domestic regulatory legal acts in the field of the use of financial assets led to the conclusion that the status of cryptocurrencies in Russia is uncertain. For example, Federal Law No. 161-FZ dated 06/27/2011 "On the National Payment System", Federal Law No. 258-FZ dated 07/31/2020 "On Experimental Legal Regimes in the Field of Digital Innovation in the Russian Federation" and Federal Law No. 259-FZ dated 07/31/2020 "On Digital Financial Assets, Digital Currency and amendments to certain legislative acts of the Russian Federation "do not disclose the concept of "cryptocurrency", contrary to the "digital ruble", which has been assigned the official status of the national currency. Such uncertainty could not but affect the formation of the norms of domestic criminal legislation. Thus, the Criminal Code of the Russian Federation also does not contain the concept of "cryptocurrency", which has given rise to controversial opinions of experts in the field of sciences of the criminal cycle in matters of criminal law qualification. In judicial practice, there is still no consensus on what a cryptocurrency is - a means of payment, accumulation or investment. At the same time, Part 10 of Article 8 of Federal Law No. 273-FZ dated December 25, 2008 "On Combating Corruption" recognizes digital currency as property in Russia. The first case in domestic judicial practice of including cryptocurrencies in the estate in bankruptcy proceedings was the 2018 Ruling of the Ninth Arbitration Court of Appeal dated 05/15/2018 N 09AP-16416/2018 in case N A40-124668/2017 against Tsarkov I.I.

Nevertheless, in a number of foreign countries, cryptocurrency is assessed as one of the promising areas for financial transactions. The most interesting example for analyzing trends in the development of the cryptocurrency market in developed countries may be the United States, where the state strategic crypto reserve was established on March 6, 2025. ^[5] The trade management staff was also instructed to develop strategies for the acquisition of additional coins that would not lead to a waste of American taxpayers' contributions. Potential strategies include using the surplus of the U.S. Treasury's Exchange Stabilization Fund, selling special drawing rights issued by the IMF, or revaluing gold certificates. We are talking about budget-neutral strategies that do not involve the redistribution of funds paid for by residents of the United States. Obviously, in this way, the authorities insure themselves against criticism in the event of a subsequent collapse of the coin market.

According to a fair judgment, "economic relations are the most important basis for the development of society" ^{[10, p. 299]}. Meanwhile, in the Russian Federation, cryptocurrencies are taken into account at the state level, but they are treated with restraint. According to the position of the Central Bank of the Russian Federation, transactions with digital currency are not prohibited, but suspicious. The law prohibits paying with cryptocurrency, so businesses cannot transfer it for their purchases or accept it as payment for their goods, work, or services. As part of trading with external partners, companies can formally pay with digital currency, but in real life it is almost impossible to do this. There are no legal cryptocurrency exchanges in Russia, and Russian businesses can hardly register on foreign exchanges due to sanctions. However, in 2025, Russia "will begin to apply an experimental legal regime (EPR) when working with cryptocurrencies. The Central Bank has prepared proposals for its launch, which have already been sent to the Government for approval."^[6]

The cryptocurrency market continues to show steady growth and development, which is confirmed by an increase in transaction volumes. According to a report by Chainalysis, in 2022, the volume of transactions using cryptocurrencies reached approximately $15.8 trillion.^[7] This indicates not only the growing popularity of cryptocurrencies among users, but also their integration into various economic processes. Trends such as the increase in the number of users, the expansion of the fields of application of cryptocurrencies and the increase in confidence in these technologies indicate their prospects and potential for further development. These changes, in turn, stimulate the development of new technologies and approaches to the use of digital assets, which contributes to their integration into the global economy.

According to some authors, cryptocurrencies have a significant impact on the development of financial technologies, which is confirmed by the growing interest in their integration into traditional financial systems.^{[8, p. 72]} Therefore, further scientific research in the field of cryptocurrencies will not lose its relevance. They should include studying their integration into everyday life, developing new blockchain-based technologies, and analyzing their impact on economic and social structures. It is also important to take into account the issues of regulation of cryptocurrencies and their adaptation to the changing conditions of the global market. We assume that further research will help to better understand their role in the economy and society, as well as develop new approaches to using these innovative tools, as well as develop proposals to minimize the consequences of unsafe use of cryptocurrencies by users. The latter include hacking of cryptocurrency exchanges and exchangers for the purpose of theft, fraud when using fake exchangers, phishing attacks, etc. According to official data from the Investigative Committee of the Russian Federation, in 2024, more than 24,000 crimes committed using digital technologies were investigated, which is 10% more than in 2023. Two thirds of these crimes are related to Internet resources. At the same time, the Supreme Court of the Russian Federation notes that with the spread of cryptocurrencies in the economy, the number of crimes in which digital currency is a means of committing a crime, criminal proceeds or the subject of encroachment is growing."^[18] Russian courts have already established extensive judicial practice related to the use of digital currency, including in cases of bribery. So, in 2023, by the decision of the Nikulinsky District Court of Moscow in case No. 02-3411/23u, a former Moscow investigator confiscated a cryptocurrency worth several billion rubles (more than 1,000 bitcoins). According to the investigation, he received the money as a bribe during the investigation of the criminal case. According to the court's decision, the bitcoins contained in his hardware wallet were recovered to the state's revenue.

The existence of the threats under consideration can harm the interests of Russia's national security, which indicates the need for law enforcement agencies to address them. Their "strict regulation of prevention as one of the categories of criminology by the law" is necessary ^{[12, p. 73]}. After all, cryptocurrencies are actively used to legalize (launder) criminally obtained income, which is difficult for law enforcement agencies to track transactions. At the same time, the ambiguous status of legal assets when using cryptocurrencies accompanies the spread of crime in the field of tax evasion, gives rise to cybercrime, and in some situations contributes to the sponsorship of terrorism.

The controversial issues regarding the qualification of criminal acts are due to the complexity in the process of proving anonymous transactions, the international nature of mutual settlements, the virtual nature of exchange processes, and the high degree of knowledge of criminals in the field of information technology. A uniform approach is needed to the mechanism of legal regulation of the use of cryptocurrencies and the training of qualified specialists in the field of digital forensics. Thus, A.V. Kamenets correctly notes the importance of an integrated approach to the problem under consideration. ^{[9, p.120]} Some authors point out the importance of criminological studies of the personality of a criminal who carries out illegal actions in the field of economic activity. ^{[11, p. 142]}

With all the attention paid to traditional methods of investigating crimes, in the case of identifying criminal mechanisms in the use of cryptocurrencies (for example, financing terrorism), the latter often prove ineffective. The high speed of transactions, their quantitative advantage and the wide scale of interactions, sometimes international, dictate the need to use effective modern means of processing and systematizing information, such as artificial intelligence (hereinafter, AI). It may well become a key tool in the arsenal of law enforcement agencies, allowing not only to analyze crimes already committed, but also to predict potential threats, acting, in fact, as a proactive response tool. For example, machine learning allows you to analyze huge amounts of blockchain data, identifying anomalies and patterns characteristic of criminal schemes: transaction authentication; identification of clusters of fraudulent addresses; forecasting the activity of criminal groups.The capabilities of artificial intelligence can be used as the basis for analyzing digital footprints, building links between databases, and behavioral analysis.

Thus, in the course of our research, we came to the following conclusions: cryptocurrency crime does not require prohibitions, but a rethinking of law; it is not technology that poses a threat, but its exploitation in conditions of legal inequality; modern cryptocurrencies represent a wide range of digital assets that differ in functionality and scope of application. The main feature of cryptocurrencies is their independence from the activities of companies or states, which means they do not have physical support. The decentralized nature of cryptocurrencies and their value, determined by supply and demand in the market, make these assets more volatile. The liquidity of the cryptocurrency market is a key aspect that determines its attractiveness to participants, while the issue of regulatory regulation of cryptocurrencies is still open. Difficulties in the process of proving criminal transactions using cryptocurrencies are caused by anonymity, cross-border, virtualization of exchange processes, and high IT qualifications of criminals. The use of AI tools can significantly optimize the work of investigative agencies, reducing time spent analyzing a large array of information data. However, such use of AI should not be thoughtless, and should be consistent with the legal norms and ethical aspects of its use, respecting the confidentiality of user data and eliminating technical failures of use in order to avoid discrimination. In other words, based on a progressive approach, AI can open up new opportunities in the fight against cryptocurrency crime. However, its implementation must be accompanied not only by strict legal control, but also by maintaining a balance between security and privacy.