Illicit crypto flows reach $100 billion since 2019, impacting these key sectors

A new report from Bloomberg shows that since 2019, shady digital wallets have been responsible for distributing nearly $100 billion in illicit funds across the cryptocurrency market, with a significant portion of the funds flowing through two key sectors of the industry.

Cryptocurrency criminals exploit stablecoins and CEXs

This report It was emphasized that criminals are increasingly using stablecoins, which currently account for the majority of the volume of illegal transactions in the cryptocurrency space, with more than half of the questionable funds ending up on centralized exchanges (CEX) such as Binance or Coinbase.

Kim Grauer, research director at Chainalysis, highlighted the “increasing sophistication” money laundering techniques used by these illicit entities, noting that criminals are researching new tokens and their use cases and are constantly adapting to avoid detection and effectively launder their funds.

On-chain analysis also found that stablecoins, which are designed to hold a fixed value and are typically pegged to the U.S. dollar, as well as centralized exchanges where customer assets are stored, and decentralized alternatives have become attractive targets for criminals trying to mix illegal funds with legal activity.

Furthermore, Chainalysis found that illicit funds originating from sources such as darknet markets, scams, ransomware, and malware are concentrated on five centralized exchanges, although it did not disclose which specific exchanges.

The continued rise in illicit flows has caught the attention of regulators around the world, leading to increased scrutiny of the cryptocurrency industry, as in the case of Binance, the largest exchange by trading volume, which is now under U.S. supervision after being fined $4.3 billion plea agreement with the Department of Justice (DOJ).

Pattern recognition tools have been implemented

According to Bloomberg, tighter regulations and increased scrutiny of exchanges have led to a decline in the amount of suspicious funds flowing into exchanges. exchangeThe monthly amount fell to about $780 million from a previous high of nearly $2 billion.

However, Chainalysis has observed an increase in the number of intermediary digital wallets on exchanges that meet know your customer (KYC), the purpose of which is to conceal the origin of funds and prevent detection of illegal activity.

Bloomberg notes that in order to combat increasingly sophisticated illegal practices, investigators are using detection techniques such as behavioral analysis to prevent such activities from developing.

Chainalysis’ Grauer concluded his statement by emphasizing the need for pattern recognition tools similar to those used by traditional banks, as the research director believes cryptocurrencies have become more integrated with financial ecosystem.

At the time of writing, the total cryptocurrency market capitalization stands at $2.07 trillion, down from the record $2.7 trillion achieved during the uptrend in the prices of major cryptocurrencies in the first quarter of the year.

Featured image from DALL-E, chart from TradingView.com