The Hidden Risks of Crypto: Why You Need to Screen Your Funds

Imagine waking up one morning to find your crypto account frozen, and all your money is no longer usable. No warning, no explanation, just a support email written in a very cold bureaucratic language citing a “compliance investigation.” You start digging deeper and discover the issue: a payment you received two weeks ago in Tether, which passed through your wallet, has been blacklisted for connections to a sanctioned entity, or even worse, a terrorist organization. You didn’t know. You didn’t do anything wrong. And yet your assets are now inaccessible, possibly for weeks, months, or permanently.

This isn’t a hypothetical. It’s already happening. In today’s blockchain environment, ignorance is no defense. Receiving funds from a wallet that once touched illicit crypto—from ransomware, darknet markets, sanctioned entities, or terrorist financing—is enough to trigger cascading consequences. You don’t have to be a criminal to get punished like one. And that’s what makes modern crypto risk so dangerous: it’s not just about what you do, it’s about what your money has touched.

The Crypto Industry’s Evolution

Long gone are the days of crypto’s Wild West, and even Gary Gensler would not argue with that. Clear regulatory compliance is no longer an obstacle but a catalyst for crypto’s widespread adoption and integration. As institutional players and traditional financial systems increasingly engage with blockchain technologies, the demand for transparency, accountability, and risk mitigation is reshaping how crypto projects operate.

With thoughtful compliance strategies, the crypto industry can dispel the stigma of illegitimacy, changing the narrative about decentralized finance and paving the way for scalable innovation and adoption.

The Hidden Risks of Crypto

The promise of crypto—the very idea of Bitcoin—has always centered on freedom. Freedom from intermediaries, borders, and the inefficiencies of traditional finance. After two decades of growth and maturity, cryptocurrency’s adoption finally surges, DeFi platforms proliferate, stablecoin adoption becomes widespread, and the necessity for AML transparency and enforcement becomes apparent.

Anti-money laundering, once viewed as an abstract compliance burden for centralized exchanges, is increasingly affecting the entire ecosystem, where transparent compliance and clarity are among the key factors driving investments into the crypto industry. While the trend is clearly showing a decrease in illicit activities in crypto, according to TMR Labs, crypto, like fiat money, will never be free from bad actors and illegal activities.

The Reality of Crypto

According to Chainalysis’ recent report, $40.9 billion has been received by illicit cryptocurrency addresses. With that amount of illegal, stolen, and laundered money circulating in the space, freelancers, protocol contributors, DAO members, and traders might easily discover that their crypto isn’t as ‘clean’ as they assumed, and that might be too late. In today’s regulatory climate, a single transfer from a “tainted” wallet can result in frozen funds, account lockdowns, or blacklisted addresses—even when the user has no malicious intent. Tether alone has frozen over $2.5 billion tied to illicit activities.

Staying Risk-Free and Safe

To stay risk-free and safe, it’s essential to screen your funds. Companies like Chainalysis, TRM Labs, and Elliptic now underpin the compliance protocols. Their systems assess the provenance of funds, assign risk scores to wallets, and flag transactions that come into proximity with illicit activity, including scams, ransomware, darknet commerce, sanctioned entities, and fraud.

Crypto wallet screening is the process of checking a wallet address to see if it’s linked to suspicious or illegal activity—such as scams, money laundering, or sanctioned entities—before sending or receiving crypto. Even if you’re not doing anything illegal, interacting with a “tainted” wallet can get your account frozen or raise red flags with exchanges, especially now that compliance is tightening.

Nonbank’s Approach

Nonbank’s approach is conceptually simple but functionally significant. It allows users to route transactions through proxy wallets, effectively isolating exchange-bound funds from unverified sources. A proxy wallet acts as a buffer: users receive funds there first, run automated AML checks on the transaction history and origin address, and only forward clean crypto. If a risk is detected, the transfer can be held or rerouted before triggering exchange-level scrutiny. The metaphor that describes it best is a condom that protects you from undesirable outcomes.

Key Takeaways

As the crypto industry matures, the informal norms of early adoption are being replaced by structures of accountability. This is not just regulatory capture; it is an evolutionary response to crypto’s growing role in the global financial system. Privacy remains a goal for many users and builders, but in practice, compliance—voluntary or enforced—is now part of the terrain, which will only further drive mass adoption.

Whether you’re receiving stablecoin payments from clients, contributing to a DAO, or managing on-chain treasuries, integrating AML screening into your workflow is no longer optional. To make it easier and simpler, Nonbank has embedded tools that allow users to do this without ceding custody or resorting to clunky, enterprise-level systems. They represent a new layer of crypto hygiene: not just for institutional actors, but for anyone who interacts with value on-chain.

The Future of Crypto

Crypto promised self-sovereignty. That promise still stands. However, sovereignty without foresight is a liability. The solution is not to retreat into maximalist purism or ignore compliance realities, but to adapt on our own terms. That means building and using tools that respect privacy while meeting the standards of a regulated world.

If we want crypto to scale—and to remain accessible for non-tech, ordinary people—we have to treat wallet security as more than a matter of passwords and phrases. It’s now about provenance, flow, and data. And in that context, screening your funds is not just smart—it’s essential.

About the Author

Andrii Bruiaka is the CEO and co-founder of onicore.io and nonbank.io. He is a fintech entrepreneur with over 10 years of experience in banking and blockchain software development. He leads cross-functional teams of over 100 specialists across engineering, product, and operations.