In the period from 2019 to the present, about $100 billion of illegal funds went into the cryptocurrency market from suspicious digital wallets. Their flows often passed through centralized exchanges and were often linked to popular stablecoins, Bloomberg reported, citing data from US blockchain analysis firm Chainalysis.
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According to Chainalysis research, criminals are actively using stablecoins, which now account for a significant portion of the volume of illegal cryptocurrency transactions. Moreover, more than half of all questionable flows occur on centralized exchanges. The issuers of stablecoins Tether and Circle have not yet responded to Bloomberg’s request to comment on this publication.
While regulations around stablecoins and digital asset platforms are being tightened around the world to prevent cryptocurrencies from being used for money laundering and terrorist financing, criminals continue to look for ways to circumvent the rules.
«The ecosystem is constantly changing,” said Kim Grauer, research director at Chainalysis. “New cryptocurrencies and criminal uses are emerging, and they are becoming increasingly sophisticated in laundering.”
Illegal funds coming from darknet markets, fraudulent transactions, ransomware and malware are concentrated on five centralized exchanges, Chainalysis said without specifying their names. In addition to trading platforms, criminals also use decentralized financial services, gambling sites, cryptomixers and blockchain bridges to launder money.
«Illicit actors may turn to centralized exchanges to launder money due to their high liquidity, ease of converting cryptocurrencies into fiat money, and integration with traditional financial services that help combine illicit funds with legitimate activities,” Chainalysis experts said.
At the same time, the volume of suspicious funds entering exchanges is decreasing. Apparently this is due to increased inspections of platforms amid tightening regulation by the authorities. According to a Chainalysis study, suspicious funds receipts have dropped to about $780 million a month from a peak of nearly $2 billion.
In an effort to hide the illicit origin of funds, attackers are increasing the number of intermediate digital wallets. Moreover, their number is growing faster on exchanges that comply with the Know Your Customer (KYC) rule, notes Chainalysis. As illegal schemes become increasingly sophisticated, investigators have begun to use detection methods such as behavioral analysis.
The total market value of stablecoins has risen to more than $160 billion from about $29 billion at the start of 2021, according to DeFiLlama. Tether Holdings’ USDT token dominates the market with a 69% share, followed by Circle Internet Financial’s USDC with a 21% share.