Compliance and intelligence software company, Chainalysis, published their study on cryptocurrency-related crimes for 2018 – 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.
Darknet markets are immune to the volatility of cryptocurrency markets, according to our research findings. Get a preview of our deep dive into darknet markets with the first blog in our Crypto Crime series. #cryptocurrency #cryptocrime https://t.co/blJCgZdxRA— Chainalysis (@chainalysis) January 18, 2019
The Method to Chainalysis Findings
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.