A new report by Bloomberg reveals that nearly $100 billion in illegal funds have been funneled through the crypto market since 2019. It still less than the tenth of the illicit USD usage.
Stablecoins and centralized exchanges
The report shows that criminals are increasingly using stablecoins, now this count as the primary method for illicit transactions in the crypto space.
Over half of these questionable funds end up on centralized exchanges like Binance or Coinbase.
Kim Grauer, Director of Research at Chainalysis, told the tracking is hard, due the growing sophistication of these money laundering techniques, with criminals constantly adapting and exploring new tokens to evade detection and successfully launder money.
Chainalysis further noted that stablecoins, designed to keep a stable value and often pegged to the US dollar, alongside centralized exchanges that hold customer assets, have become attractive targets for criminals.
They use these platforms to mix illicit funds with legitimate transactions.
Chainalysis also found that illegal funds from darknet markets, fraud, ransomware, and malware are heavily concentrated in five centralized exchanges, though the specific names weren’t disclosed.
Impressive, very nice! Now see USD!
This rise in illicit crypto flows has prompted regulators worldwide to scrutinize the crypto industry more closely. If only they do the same with the traditional finance!
For instance, Binance, the largest exchange by trading volume, is under US oversight after agreeing to a $4.3 billion penalty with the Department of Justice.
According to Bloomberg, tighter regulations and increased attention by exchanges have reduced the volume of suspicious funds arriving at exchanges, dropping from nearly $2 billion to about $780 million monthly.
Yet, Chainalysis observed more intermediary digital wallets on exchanges following know-your-customer rules, which help obscure the origin of funds and avoid detection.
To combat these schemes, investigators use behavioral analytics and pattern recognition tools, similar to those used by traditional banks, to prevent illicit activities. The problem is they aren’t working too good.
Based on estimations, at least 2% of global GDP is from illicit source. That’s now 1,8 trillion per year. 60%-of it is from USD, as USD supply is roughly 60% of the world’s total currency supply. That’s $1080 billion each year, and after five years since ’19 is $5400 billion illicit USD activity. Oops. I smell hypocrisy.
FUD me harder
Kim Grauer from Chainalysis highlighted the adoption of these advanced tools as cryptocurrencies become more integrated into the financial system.
Despite the challenges, the use of pattern recognition and behavioral analytics shows promise in addressing the growing issue of illegal crypto flows.
Currently, the total crypto market capitalization stands at $2.07 trillion, down from a high of $2.7 trillion during the price surge of the largest cryptocurrencies in the first quarter of the year.
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