Cryptocurrency has grown in popularity over the last decade, thanks to its ability to facilitate quick and anonymous transactions. However, it has also become a tool of choice for criminals and terrorists, who use digital currencies to launder money, finance their operations, and even purchase and sell illegal goods and services. According to a recent report, most criminal cryptocurrency is funneled through just five exchanges, making the global cryptocurrency landscape vulnerable to exploitation.
The report, which was recently published by blockchain analytics firm CipherTrace, analyzed the amount of digital currency flowing through cryptocurrency exchanges in 2020. According to the findings, roughly 25 percent of all criminal cryptocurrency was moving through exchanges in just five countries: the United States, the United Kingdom, Singapore, Estonia, and South Korea. This means that a large portion of this money is potentially being laundered and used for illicit activities.
The report also found that, while the majority of criminal cryptocurrency transactions still take place in traditional, fiat-based exchanges, the growth of decentralized exchanges (DEX) is making it easier for criminals to move large sums of money without leaving a trace.
In response to the report, CipherTrace and other cryptocurrency security firms are calling for regulators to bring more clarity to the cryptocurrency landscape, and for for exchanges to apply stricter KYC (Know Your Customer) and AML (Anti-Money Laundering) standards. This would help law enforcement crackdown on criminal and terrorist organizations and protect the global cryptocurrency ecosystem from exploitation.
Another solution proposed by CipherTrace is the adoption of blockchain analytics, which can be used to trace and analyze illegal activities, such as money laundering. Blockchain analytics would help exchanges detect suspicious activity in real-time, enabling them to block the flow of funds before they can be used for criminal activities.
What is clear is that more needs to be done to secure the global cryptocurrency landscape and prevent criminal groups from exploiting it. By cracking down on the exchanges being used to launder money and strengthening KYC and AML compliance standards, we can make sure that digital currencies are used for legitimate purposes and not those of criminals and terrorists.
