The European Union Agency for Law Enforcement Cooperation (Europol) says three to four billion pounds ($4.1 to $5.5 billion) of criminal money is being laundered using cryptocurrency in Europe alone.
“It’s growing quite quickly and we’re quite concerned. They’re not banks and governed by a central authority so the police cannot monitor those transactions,” Europol’s director, Rob Wainwright, told BBC’s Panorama.
"And if they do identify them as criminal they have no way to freeze the assets unlike in the regular banking system," he added.
Wainwright said regulators and industry leaders need to work together to tackle the issue.
Another problem Europol has identified involves the method that criminals use to launder money.
"It's very difficult for the police in most cases to identify who is cashing this out," Mr Wainwright said.
He called on those running the Bitcoin (TIKER: BTC.EXANTE) industries to work with enforcement agencies.