Although only 0.05% of all cryptocurrency transactions worldwide are linked to the laundering of money, Europol says it could get much worse in the future.
Criminals are becoming more sophisticated in their use of cryptocurrency transactions and their money laundering schemes are becoming increasingly complex, the European police agency said.
The Chainalysis report indicates the origin of money being laundered to stem from darknet sales and potential ransomware attacks.
Cryptocurrency transactions are supposed to offer significant transparency as each transaction is logged in a blockchain, allowing a paper trail of transactions to be made available as a digital ledger.
However, the rise of so-called decentralized finance (DeFi) has led to potential misuse.
DeFi converts cryptocurrencies into other coins and currencies, which inevitably makes the transaction trail increasingly difficult to trace. This resultantly has become favourable for money launderers as it leaves a cold trail.
Recent high-profile cryptocurrency scams, including the recent breach on the trading platform crypto.com, have been found to use DeFi services such as Tornado Cash because they complicate the transaction trail.
Though Tornado Cash is legal for mixing Ethereum blockchain transactions, its application reduces the transparency with each transaction.
“Privacy is not criminal but criminals are seeking these privacy solutions,” said Victor Fang, Founder and CEO of blockchain analytics company Anchain.AI. “This is the tip of the iceberg, the beginning of the future we’re going to see play out.”
The Chainanalysis report suggests that most illicit cryptocurrency transactions are currently concentrated on a small number of DeFi services. Therefore, identifying and targeting these services using law enforcement resources could cripple the potential for crypto money laundering in the future.
