Cryptonews recently published a report by CryptoISAC and Merkle Science, indicating that despite the growing popularity of cryptocurrencies, criminals still prefer using cash for illicit activities. The report showed that only 0.34% of crypto transactions in 2023 were flagged as potentially related to illicit finance, in contrast to the estimated 2% to 5% of global GDP laundered annually through traditional financial systems amounting to as much as $2 trillion. This comparison highlights that while crypto transactions are under significant scrutiny, traditional financial systems pose a much larger threat in terms of illicit finance.
Robert Whitaker, the director of law enforcement affairs at Merkle Science, emphasized that U.S. crypto exchanges adhere to strict know-your-customer (KYC) and anti-money laundering (AML) regulations, making it easier for authorities to trace and de-anonymize illegal activities on blockchain networks. In contrast, cash transactions are harder to track, making them the preferred method for criminal activities. The transparency and immutability of blockchain technology play a crucial role in mitigating illicit finance, as the public ledger behind crypto transactions allows for greater traceability.
The report also discussed the role of stablecoins in illicit finance, noting that stablecoins like Tether’s USDT and Circle’s USDC showed very low levels of suspicious activity. Only 0.61% of Tether’s USDT and 0.22% of Circle’s USDC transactions were flagged as potentially illicit from July 2021 to June 2024. Despite this, the report called for continued international cooperation to address illicit crypto activities, especially as many offshore exchanges operate beyond the reach of U.S. regulations. The U.S. Treasury’s 2024 risk assessment found that virtual assets remain a smaller threat to money laundering compared to fiat currency.
In light of these findings, the report highlights the need for global cooperation to tackle illicit finance effectively. While crypto transactions remain a small fraction of illicit finance compared to traditional financial systems, the transparency and compliance measures in the crypto space make it easier for authorities to track and combat illegal activities. The report emphasizes the importance of continued vigilance and regulatory efforts to ensure that cryptocurrencies are not used for illicit purposes and to prevent money laundering and other criminal activities.
Overall, the report sheds light on the ongoing challenges in combating illicit finance and emphasizes the role of blockchain technology in mitigating these risks. By leveraging the transparency and traceability of blockchain networks, authorities can better monitor and prevent illegal activities in the crypto space. As the industry continues to evolve, regulatory efforts and international cooperation will be crucial in maintaining the integrity of the financial system and preventing illicit activities in both traditional and crypto finance.
