Chainalysis Report Finds 76% Dirty Money Traverse Exchanges and Bitcoin Transactions on the Darknet Grew Twice in 2018

Chainalysis Report Finds 76% Dirty Money Traverse Exchanges and Bitcoin Transactions on the Darknet Grew Twice in 2018

Compliance and intelligence software company, Chainalysis, published their study on cryptocurrency-related crimes for 2018 – CRYPTO CRIME REPORT: Decoding Darknet Markets, Hacks, and Scams

A majority of illicit funds actually flow through either exchanges, or peer-to-peer exchanges, with the rest flowing through other conversion services such as mixing services, [Bitcoin] ATMs and gambling sites.

CRYPTO CRIME REPORT: Decoding Darknet Markets, Hacks, and Scams

The report specifies the percentage of laundered funds by means of cryptocurrency passed through various exchanges, including centralized ones and p2p services as 76% for 2018. To dissect this figure, 64% illegal funds were laundered by trading it through exchanges. The remaining 12% were laundered through peer-to-peer exchange services.

Other cryptocurrency conversion means are gambling sites, bitcoin ATMs, and mixing services. 23.8% of the money was laundered through these methods.

How Crypto Exchanges will Cope with Dirty Money Transactions

Last year, more than $1 billion worth of cryptocurrency was shifted through exchanges. These funds are said to be illegal due to its use in the purchasing or selling of drugs. Another thing that sets apart these funds as illicit is that it was pilfered straight from exchanges.

Down the line, exchanges may boost the KYC and AML verification process by enforcing Know Your Transaction, or KYT, requirement for stablecoins.

Gemini, a crypto exchange headed by the Winklevoss brothers, is utilizing Nasdaq’s SMARTS Surveillance System to monitor transactions in their platform.

BTC Darknet Transactions Increased in 2018

Chainalysis also evaluated transactions done in darknet marketplaces for 2018. The report cites the sum of BTC volumes doubled to $2 million daily transactions. Money inflows in the darknet were affected in the short-term by the 2017 shut down of AlphaBay and Hansa. In 2018, the volume began to rise as new marketplaces were established.

The Method to Chainalysis Findings

Analysts can only estimate money laundering activity by working backward from successful prosecutions and making assumptions about how much of the total activity has been detected.

CRYPTO CRIME REPORT: Decoding Darknet Markets, Hacks, and Scams

Chainalysis trailed money laundering by working backwards and then forwards. The researchers used details taken from prosecutions and crypto funds confiscated by law enforcement. They also followed criminal funds up until it was deposited in exchanges and mixing services. At the same time, the firm uses anomaly prevention software to trace illicit digital currencies.


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