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
Anonymity: Blockchain addresses are visible but not identities; tracing ownership is challenging because of privacy enhancing solutions.
Irreversibility: Once confirmed, transactions cannot be recalled, unlike bank transfers.
Speed and Scale: High transaction volume creates data overload, masking anomalies.
Cross-Chain Laundering: Criminals layer transactions across multiple blockchains.
Consumer Burden: Most victims lack the literacy needed to trace or safeguard digital assets.
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:
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.
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.
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
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).
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.
Catch up with techUK's Financial Services Council's work on tackling financial crime
Financial Services Programme activities
The techUK Financial Services programme connects tech firms, the FS industry, and regulators to ensure innovation and technology can be fully embraced. Through market engagement activities and events, we help to empower decision makers and aid collaboration.
Our members develop strong networks, build meaningful partnerships and grow their businesses as we all work together to create a thriving environment where industry, government and stakeholders come together to realise the positive outcomes tech can deliver.
James leads our financial services programme of activity. He works closely with member firms from across the sector to ensure innovation and technology are fully harnessed and embraced by both industry and regulators.
Prior to joining us James worked at other business organisations including TheCityUK and the Confederation of British Industry (CBI) in roles focused on supporting the financial & related professional services eco-system, with a particular focus on financial technology and market infrastructure.
Junior Programme Manager - Financial Services & SME Engagement
Lourdes de Miguel
Junior Programme Manager - Financial Services & SME Engagement
Lourdes de Miguel joined techUK in January 2026 as a Junior Programme Manager in the Financial Services and SME Engagement programmes.
Lourdes supports the financial service programme’s mission of connecting firms from across the ecosystem to ensure innovation and technology can be fully harnessed by financial services. She also assists the SME team to help members meet, network and collaborate with their peers, industry leaders and customers.
Prior to joining techUK, Lourdes gained experience in research, finance, and stakeholder engagement across several organisations. Starting off at Elcano Royal Institute in Brussels, she supported seminar creation and event organization engaging with key policymakers and industry leaders developing an understanding of European policymaking. She later joined Swift, assisting the Industry Engagement team to build connections with Central Banks and other international bodies as well as developing research on macroeconomic topics.
Lourdes holds a BA (with honours) in Politics and International Studies from the University of Warwick.
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach
Programme Assistant, Data Centres, Climate, Environment and Sustainability, Market Access, techUK
Lucas Banach is Programme Assistant at techUK, he works on a range of programmes including Data Centres; Climate, Environment & Sustainability; Market Access and Smart Infrastructure and Systems.
Before that Lucas who joined in 2008, held various roles in our organisation, which included his role as Office Executive, Groups and Concept Viability Administrator, and most recently he worked as Programme Executive for Public Sector. He has a postgraduate degree in International Relations from the Andrzej Frycz-Modrzewski Cracow University.
