Centralized exchanges and sanctioned services like Garantex play key roles in laundering 'dirty crypto,' highlighting the need for stronger AML measures.
Cryptocurrency has revolutionized the financial world, but it has also brought new challenges, particularly in the realm of illicit activities. Recent reports from Chainalysis shed light on the extent of these challenges and the efforts being made to combat them.
According to Chainalysis, cryptocurrency exchanges have received nearly $100 billion in crypto from illicit addresses since 2019. This staggering amount highlights the significant role that these exchanges play in the laundering of 'dirty crypto.' The year 2022 saw the highest influx, with $30 billion worth of illicit crypto being recorded.
One of the key findings is that about 30% of this illicit crypto ends up at sanctioned services, such as Russia's Garantex. This indicates a lack of international cooperation on anti-money laundering (AML) measures, making it easier for illicit actors to move their funds across borders.
Centralized exchanges are particularly attractive to illicit actors due to their liquidity and the ease with which cryptocurrency can be converted to fiat currency. Chainalysis reports that 50% of illicit crypto funds are laundered through centralized exchanges. These funds often go through obfuscation techniques like crypto mixers before reaching the exchanges.
The report also notes a significant surge in illicit funds moving across blockchain bridges starting in late 2023. This trend adds another layer of complexity to the already challenging task of tracking and combating illicit crypto activities.
Despite the challenges, there are ongoing efforts to combat money laundering in the crypto space. Tether, the largest stablecoin issuer, has taken proactive steps by freezing approximately 1,600 addresses holding around $1.5 billion worth of USDT. This move aims to curb the use of stablecoins for illicit transactions.
Centralized exchanges are also under increasing regulatory pressure to implement robust AML programs. These programs are crucial for identifying and preventing illicit activities, but they require significant resources and cooperation from various stakeholders.
The reports from Chainalysis highlight the urgent need for enhanced international cooperation and robust AML measures in the cryptocurrency space. Centralized exchanges, while providing liquidity and ease of conversion, must strengthen their AML programs to prevent being exploited by illicit actors.
For the crypto industry to thrive and gain wider acceptance, addressing these challenges is essential. Stakeholders, including regulators, exchanges, and stablecoin issuers, must work together to create a safer and more transparent financial ecosystem.
