The dark side of crypto: money laundering
Though cryptocurrencies are gaining popularity increasingly, the possibility of crypto money laundering is turning into a cause of worry.
Sophia
The financial world has time and again raised concerns over the unregulated nature of cryptocurrencies. Though cryptocurrencies are gaining popularity increasingly, the possibility of crypto money laundering is turning into a cause of worry.
If we listen to the crypto experts, they’re of the opinion that crypto money laundering is far more complex than traditional money laundering, thus making it almost ineffective in practice. To add to this further, they suggest that digital transactions are transparent in nature which increases accountability. Yet another point that crypto enthusiasts often raise is that the volume of crypto money laundering is significantly lower and that the focus of mainstream media is largely on illegal activities. They often blame the media for completely negating the innovative technology that keeps the cryptosystem running. While all of these concerns have a fair share of truth, there is no doubt that there is a certain degree of money laundering that’s happening in the crypto world. multibank cryptocurrency exchange
Cryptocurrencies are gradually looking towards turning into a mainstream medium of exchange and several noted companies have started accepting payments through digital currencies. Banks are also keen on adopting blockchain technology which only strengthens the argument that cryptocurrencies could entirely replace plastic and paper money. Hence, it is of utmost importance to identify the problem areas and take immediate measures to resolve them.
What makes crypto vulnerable?
The anonymous and private nature of transactions make it easier to brush the illegitimate origin of payments under the carpet. Since cross-border transactions, decentralized peer-to-peer payments, and anonymity are key features of the cryptocurrency market, they are often misused. Crypto money laundering also includes the three-stage process that is common in cash-based money laundering.
- Placement
Intermediaries are used at this stage to bring illicit money into the regular financial system. This could be through financial institutions, exchanges, shops, or casinos. As a type of crypto can be purchased using cash or yet another crypto, it can be easily done via an online crypto exchange. This is usually done on those exchanges that have lesser compliance levels in accordance with AML regulations.
- Layering
At this stage, criminals attempt to cover up the actual source of illegal funding by using structured transactions. Because of this, tracing illegal funds can be hard. Criminals could convert crypto or participate in Initial Coin Offerings or ICOs on a crypto exchange to buy one cryptocurrency into another and even move their holdings to a different country.
- Crypto Mixing
Tumblers are mixing services that facilitate transactions between cryptocurrency users. It allows them to mix their cryptos with one another. Basically, it works by taking a client’s crypto assets and sending them to a number of addresses only to recombine them later. As a result, ‘clean’ cryptos are obtained.
- Peer-to-peer Crypto networks
The decentralized cryptocurrency networks are often misused to transfer funds to nationals where anti-money laundering laws are not very stringent. Further, these exchanges make it possible for individual crypto traders to convert crypto into fiat currencies so that high-end item can be bought easily.
5.Crypto ATMs
Crypto ATMs let people buy bitcoin through credit or debit cards as well as through cash deposits. A few crypto ATMs also allow the trading of cryptocurrencies for cash directly. This is a potential loophole as most nations do not have proper KYC measures in place.
