Industry views
31 Oct 2025
by Isadora Arredondo

Harnessing Blockchain to Combat Crypto Fraud: How Hedera’s Toolkit Supports Enterprise-Grade Prevention

Guest blog by Isadora Arredondo, Global Policy Director at Hedera, as part of techUK's Financial Crime campaign week

The Growing Threat of Crypto Fraud in the UK 

Crypto fraud has become one of the fastest-increasing financial crime categories in the UK. According to Action Fraud, UK investors lost £649 million to investment fraud in 2024, with cryptocurrency implicated in around two-thirds of reported cases.1 The FCA reports that in just six months of 2025, it received over 5,000 reports of fake FCA impersonation scams, and took down over 900 illegal crypto websites and 56 fraudulent apps.2 
Such losses not only harm consumers but also threaten the UK’s ambitions to lead in digital finance innovation. 

Common Types of Crypto Fraud 

Investment / “Get-Rich-Quick” Scams 

Fraudsters promise inflated returns via fake investment platforms or influencer campaigns. 

Address Poisoning / Copy-Address Attacks 

Scammers mimic known wallet addresses by one or two characters to misdirect funds. 

Phishing & Fake Airdrops 

Victims are tricked into connecting wallets or signing malicious approvals. 

Impersonation / Recovery Scams 

Fraudsters pose as regulators or firms offering to “recover” stolen funds. 

Key Compromise / Exploits 

Stolen or exposed private keys enable theft. 

Each type of fraud evolves rapidly, often combining social engineering and technical deception.3 

 

Detection and Consumer Support Challenges 

  1. Anonymity: Blockchain addresses are visible but not identities; tracing ownership is challenging because of privacy enhancing solutions.  

  1. Irreversibility: Once confirmed, transactions cannot be recalled, unlike bank transfers. 

  1. Speed and Scale: High transaction volume creates data overload, masking anomalies. 

  1. Cross-Chain Laundering: Criminals layer transactions across multiple blockchains. 

  1. Consumer Burden: Most victims lack the literacy needed to trace or safeguard digital assets. 

  1. Compliance Complexity: Integrating on-chain risk data into existing AML/KYC systems remains cumbersome. 

 

How Blockchain Analytics and Hedera’s Native Toolkit Enable Fraud Prevention 

Unlike traditional finance systems, blockchain networks are public, permanent, and auditable. This transparency allows regulators, enterprises, and analytics providers to trace funds, identify bad actors, and build predictive models against fraud.4 

Analytics platforms such as Chainalysis, TRM Labs, and Elliptic harness blockchain’s inherent visibility to: 

  • Detect suspicious transactions in real time. 

  • Map address clusters linked to scams or sanctioned entities. 

  • Monitor flows across exchanges, bridges, and mixers. 

  • Score wallets and transactions by risk level. 

  • Share threat intelligence across firms and law enforcement. 

  • This analytical ecosystem has evolved into a data-driven deterrence layer — essential for financial institutions, stablecoin issuers, and payment platforms. 

 

Hedera’s Enterprise-Grade Advantages 

Hedera Hashgraph’s architecture and integrated ecosystem enable enterprises to embed fraud-prevention features directly into their operations: 

  1. Native Tokenization (HTS)5 

  • The Hedera Token Service (HTS) supports native asset issuance without custom smart contracts, reducing code risk and attack surface. 

  • Tokens can include compliance flags, transfer restrictions, and programmable controls at issuance. 

  1. Compliance-Ready Integrations 

  • Elliptic6 supports Hedera’s  Stable Coin Studio by enabling automatic screening, risk scoring, and transaction monitoring within enterprise workflows. 

  • These integrations streamline AML compliance and fraud analytics for token issuers and payment platforms. 

  1. Consensus Service for Auditability 

  • Hedera’s Consensus Service (HCS) allows enterprises to record signed, timestamped events for immutable audit trails — a robust defense against internal fraud or tampering.7 

  1. Programmable Guardrails 

  • Enterprises can implement on-chain rules (e.g., multi-signature approvals, timelocks, spending thresholds) and off-chain API calls (e.g., pre-transfer checks via Chainalysis or TRM). 

  1. High Throughput and Predictable Costs 

  • With sub-second finality and fixed low fees, Hedera supports real-time fraud analytics without prohibitive costs. 

 

Conclusion & recommendations 

Fraud is not an inevitable cost of digital innovation — it is a design challenge. By embedding compliance, analytics, and transparency directly into blockchain infrastructure, enterprises can safeguard users while strengthening trust in the UK’s emerging digital asset economy. 


Hedera’s native toolkit and ecosystem integrations demonstrate how this is achievable today — supporting techUK’s mission to foster a secure, innovative, and competitive digital economy.  

The UK should look to seize the opportunities provided by blockchain analytics and foster greater dialogue between regulatory authorities and technology solution providers to embed breakthrough technologies into the supervisory process. The latest wave of blockchain and AI innovations will increasingly support crime and fraud detection, as well as increasingly more sophisticated tools to prevent crime in the first place.   

 

1 https://www.cityoflondon.police.uk/news/city-of-london/news/2025/april/city-of-london-police-over-649m-lost-to-investment-fraud-in-2024-with-cryptocurrency-fraud-on-the-rise/

2 https://www.fca.org.uk/news/press-releases/fake-fca-scams-reported-6-months-2025

3 https://www.scotland.police.uk/advice-and-information/internet-safety/cryptocurrency-scams/

4 Adewale, Titilope & Olorunyomi, Titilayo & Odonkor, Theodore. (2022). Blockchain-enhanced financial transparency: A conceptual approach to reporting and compliance. https://www.researchgate.net/publication/387400146_Blockchain-enhanced_financial_transparency_A_conceptual_approach_to_reporting_and_compliance

5 https://docs.hedera.com/hedera/core-concepts/tokens/hedera-token-service-hts-native-tokenization

6 https://www.elliptic.co/media-center/elliptic-hedera-integration

7 https://hedera.com/use-cases/decentralized-logs / https://hedera.com/consensus-service

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Authors

Isadora Arredondo

Isadora Arredondo

Global Policy Director, Hedera

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