Bitcoin
Cryptocurrency is increasingly being used for money laundering, says Chainalysis
In this photo illustration, a visual representation of the digital cryptocurrency Bitcoin is on display in Paris, France, on March 5, 2024.
Chesnot | Getty Images News | Getty Images
Money launderers are increasingly using cryptocurrencies to hide the origins and movement of illegally obtained funds, according to a report by Chainalysis.
The report, which studied trends and new forms of money laundering, said cryptocurrencies are being used for off-chain crimes such as drug trafficking and fraud because cryptocurrencies are “cross-border, virtually instantaneous and generally cheap to transact with.”
“The growing ubiquity of cryptocurrency has made it a tool for laundering proceeds from various off-chain crimes, such as narcotics trafficking and fraud. By 2024, cryptocurrency money laundering will encompass all crimes — not just those that are inherently tied to the cryptocurrency ecosystem,” the blockchain analytics firm said in a July report.
This is because the value of the world’s largest cryptocurrency, bitcoin, has increased by almost 55% this year, according to LSEG.
Money launderers use various methods such as cryptocurrency mixers, cross-chain bridges, and wallet “hops” to hide the flow of funds.
Cryptocurrency mixers, or tumblers, involve mixing cryptocurrencies from multiple sources to make their origin and ownership harder to trace. Bad actors also take advantage of cryptocurrency bridges to hide the origins of funds by moving them between different blockchain networks.
“Hops” involve moving funds between multiple intermediary personal wallets to avoid detection.
Since 2019, nearly $100 billion in funds have been transferred from known illicit wallets to conversion services — where cryptocurrency is converted into fiat currency, data from Chainalysis showed. The largest amount identified was $30 billion in 2022.
Sanctioned Russian Cryptocurrency Exchange Garantex was largely responsible for the record amount, as its services offer launderers a way to convert illegitimately obtained cryptocurrencies into cash.
But these illegitimate activities can still be traced, Chainalysis said.
Crypto laundering can be tracked and analyzed with a greater degree of accuracy and speed, thanks to the transparency of blockchain, compared to traditional financial systems. Still, crypto laundering is expected to become more prevalent, the report said.
“As global acceptance of cryptocurrencies grows and barriers to entry decrease, Chainalysis expects this type of money laundering to become more significant, as illicit actors have historically co-opted new technologies for their own purposes,” the blockchain analytics firm said.