By Adedapo Adesanya
Money launderers are increasingly using cryptocurrencies to conceal the origins and movement of illicit financial flows, a new report shows.
According to a report by Chainalysis, seen by Business Post, crypto is being used for off-chain crimes such as drug trafficking and fraud.
It was disclosed that due to the nature of crypto being “cross-border, virtually instant, and generally inexpensive to transact,” it is increasingly being used for illegal activities.
“The growing ubiquity of crypto has made it a tool for laundering proceeds from various off-chain crimes, such as narcotics trafficking and fraud. In 2024, money laundering in crypto encompasses all crime — not just that which is inherently tied to the crypto ecosystem,” the blockchain analytics firm said in the report.
According to the report, money launderers use various methods such as crypto mixers, cross-chain bridges and hops between wallets to conceal the flow of funds.
Crypto mixers, or tumblers, involve mixing crypto from various sources to make the detection of their origin and ownership difficult. Bad actors also leverage on crypto bridges to hide the origins of funds by moving them between different blockchain networks.
The term hops involves moving funds between numerous intermediary personal wallets to avoid detection.
The data revealed that since 2019, almost $100 billion in funds have been transferred from known illicit wallets to conversion services – where crypto is converted to fiat currency.
The highest amount identified was $30 billion in 2022, Chainalysis said, adding that sanctioned Russian crypto exchange Garantex was largely behind the record amount as its services offer launderers a way to convert illegitimately obtained crypto into cash.
It, however, disclosed that the illegitimate activities can still be tracked down.
Crypto laundering can be traced and analyzed with a higher degree of accuracy and speed, thanks to the transparency of blockchain, as compared to traditional financial systems.
Despite the possibility of tracking such activities, the report said crypto laundering is expected to become more prevalent in the coming years.
“As the global acceptance of cryptocurrencies grows and barriers to entry diminish, Chainalysis expects this type of money laundering to become more significant, as illicit actors historically co-opt new technologies for their purposes,” the blockchain analytics firm said.