Which Is More Popular for Criminal Activities? -Breaking
Crypto cannot so easily be decoupled from the aura of criminality, as many still associate blockchain technology with the “dark web” and potentially illegal activities such as money laundering. The question of illegal activity in crypto has also been high on the agenda of regulators, with politicians often labelling cryptocurrencies as “a particular concern” in terms of criminal activity and terrorist financing. Recent research has revealed the truth about crypto’s prevalence in criminal activity.
The Old Fashioned Way of Laundering Money
A U.S. Treasury Department report released every three years shows that crypto is not a viable tool for criminal activity. However, it has just published a new report showing that fiat remains the most popular medium to commit financial crime. It provided an in-depth assessment of how money laundering works.
The Treasury’s findings included a detailed discussion of virtual currencies, stating that their user base and market capitalization have expanded dramatically since their previous risk assessment in 2018. These reports showed that traditional networks and fiat currencies still outnumber cryptocurrency.
According to the U.S. Treasury, “The use virtual assets for money laundering is still far lower than that of fiat currency or more traditional methods.”
These results are also found in SWIFT’s 2020 report. DeFi can be used to transfer obscure funds, but government-backed fiat remains the best choice when it comes to laundering money.
According to the report, “The number of cases of laundering using cryptocurrencies is still relatively small in comparison with the volume of cash that was laundered by traditional methods”
With Crypto, it’s difficult to laundering money
Chainalysis reports that criminal activity accounted for 2.1% of all cryptocurrency transactions volumes in 2019. This amounts to approximately $21.4 billion. The illegal cryptocurrency share fell to 0.3% in 2020 with $10.0 billion of transaction volume. The UN estimates that money laundering and other illicit activities account for 2.7% of the global GDP each year. It is evident that cryptocurrency transactions are much less criminal than fiat currency and their use is on the decline.
Cryptocurrencies are used in a variety of illegal ways, which is evident from the use cases. The report by the not-for-profit research organization ‘Rand Corporation’ noted that, despite the “perceived attractiveness of cryptocurrencies for money laundering purposes . . . an estimated 99% of cryptocurrency transactions are performed through centralised exchanges, which can be subject to AML/CFT regulation similar to traditional banks or exchanges.”
In the report, Chainalysis highlighted that cyber-criminals dealing with cryptocurrencies typically share one common goal: move their “ill-gotten funds to a service where they can be kept safe from the authorities and eventually converted to cash.” The most significant difference between fiat and cryptocurrency-based money laundering is that, due to the inherent transparency of blockchain technology, it is easier to trace how criminals move their cryptocurrency between wallets and services to convert their funds into cash.
Peer-to-peer and self-custodial funds can be used to help users evade financial controls. However, regulations cannot target only centralized intermediaries like the largest exchanges. On the other hand, most blockchains – including – use very transparent public ledgers, making it easier to track criminals down.
Regulators often name ‘Zcash’ and other privacy coins as a focal point of money laundering concerns. Privacy coins frequently use zero-knowledge protocols to protect customers’ information from any other transaction partners. This protocol is not being used by malicious actors, but there are few evidence to suggest otherwise.
But… Crypto Is Still a Good Choice for Crime
However, virtual currency use has increased in order to pay for drugs online, launder criminal funds and avoid sanctions. According to the U.S. Treasury’s recent report, more money was sent to criminal Blockchain addresses in 2021 that in any previous year. According to the U.S Treasury, “virtual assets” are an ever-evolving domain within money launderers’ expanding armory for concealing their finances.
Cybercriminals accumulated $8.6 Billion worth of cryptocurrency by sending it from illegal addresses to hosted addresses.
The report says that this represents an additional 30% in money laundering activities over 2020. However, such an increase is not surprising given the substantial growth in both legal and illegal cryptocurrency activity in 2021.
Undoubtedly, the differences in laundering strategies among the top-grossing cryptocurrency-based crimes in 2021 is theft and scams. Virtual assets were used in ransomware and phishing scams all through the pandemic. To lure victims to reveal personal data or infect their computers with virus, shady operators make use of the volatility and profit potential offered by the cryptocurrency market. After the attack, attackers demand that victims pay in cryptocurrency. This is both irreversible and pseudonymous.
More recently, following Russia’s invasion of Ukraine, western governments imposed stringent sanctions on Russia. Concerns soon arose over the potential for individuals to use cryptocurrency to evade sanctions, as was noted in Russia’s booming interest in cryptocurrencies. Tom Robinson, CEO of blockchain analytics firm Elliptic, underlined that crypto “can and will be used for sanctions evasion” but isn’t a “silver bullet.”
Get the other side of crypto!
Upgrade your inbox and get our DailyCoin editors’ picks 1x a week delivered straight to your inbox.
With just one click, you can unsubscribe at any time.