Stablecoins Dominate Illicit Transactions: New research from blockchain analytics company Chainalysis has revealed that stablecoins are being utilized for money laundering despite their popularity. According to Kim Grauer, Director of Research at Chainalysis Report, who spoke with Cryptonews.com, “crypto-native money laundering” happens whenever a criminal is linked to an on-chain wallet.
“Instances of on-chain money laundering include exchange heists, crypto scams, and darknet market proceeds, as opposed to off-chain activities such as narcotics trafficking and fraud,” Grauer stated.
According to Chainalysis’s “Money Laundering and Cryptocurrency” research, stablecoins are becoming a significant part of illicit payments through intermediary wallets. This agrees with what Chainalysis has already found: that stablecoins handle the vast bulk of all illegal transactions.
Why Stablecoins Launder Money
Grauer says there is no correlation between Stablecoins Dominate Illicit Transactions and illegal behavior. “Both good and bad actors often prefer to hold funds in an asset with a value that will not change based on swings in the market,” says Chainalysis Report’ analysis. Criminals who aren’t crypto natives may adopt cryptocurrencies more often, contributing to the growth of stablecoins as a means of laundering money. To establish “large-scale money laundering infrastructure,” Grauer said that conventional money launderers are beginning to use crypto networks.
This seems correct, according to Alan Orwick, co-founder of Layer-1 solution Quai Network, and in an interview with Crypto News. The data from the Chainalysis Report identifies sanctioned entities as the primary factor impacting the volume of unlawful transactions. Orwick stated that out of all the categories of illicit transactions, the $14.9 billion in volume from sanctioned companies accounted for 61.5%, more than darknets, malware, and stolen funds combined.
Money Laundering with Stablecoins Drawbacks
According to Grauer, there isn’t a technical aspect of Stablecoins Dominate Illicit Transaction that makes them ideal for illegal conduct, even though their usage for money laundering is on the rise. In reality, Grauer made the point that stablecoin issuers have the power to seize illegitimate funds if they show signs of suspicion. According to Jonathan Thomas, CEO and Co-Founder of Blueberry Protocol, who spoke with Crypto News, Stablecoin issuers have been tackling the issue of sanctioned businesses by blocking or freezing their addresses.
One example is the recent action of stablecoin issuer Tether (USDT) to tackle money laundering. USDT worth $5.2 million was frozen. Blockchain monitoring software MisTrack detected the illegal funds. Identified as “USDT Banned Addresses,” twelve Ethereum (ETH) wallets received the frozen USDT. Many phishing tactics were thought to have been used to launder the cash.
Tether also froze addresses linked to sanctioned businesses in April this year. This followed claims that PDVSA, Venezuela’s state-run oil corporation. He had been exploiting Tether to evade gasoline and crude oil export restrictions. Thomas elucidated the “blocking or freezing funds” process by explaining that it involves monitoring specific patterns when using stablecoins.
According to Grauer, chanalysisata analysis can reveal intermediary wallets that harbor substantial cash associated with crypto-native criminal activities. Many additional intermediate wallets deposit cryptocurrency into these wallets, which operate as consolidation centers. “Intermediaries are defined as separate, anonymous wallets that sit between two known endpoints,” Grauser explained.
Cryptocurrency Regulations Prevent Illicit Use
Thomas elaborated that one way to stop illegal stablecoin transactions is to freeze or block the funds. Still, he made a point of saying that rules aimed at punishing corrupt actors or sanctioned companies will reduce this kind of behavior. Thankfully, Grauer announced that this is already in motion. She observed that the Travel Rule, anti-money laundering (AML) rules, and the Fifth Anti-Money. The Laundering Directive of the European Union is a significant step forward in the worldwide enforcement of anti-money laundering efforts.
“Blockchain intelligence tools and transaction monitoring systems can enable a sustainable and secure framework. That allows for innovation without illicit activity,” Grauer commented, adding that this could be achieved. In conjunction with improved Know Your Customer (KYC) and anti-money-laundering protocols implemented by crypto exchanges and conventional financial institutions. With this in mind, Grauer is optimistic about the future of on-chain money laundering. It is still impossible to forecast trends shortly. She said that because laws are still being enacted in many nations.
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