The Inconvenient Truth About Cryptocurrency Money Laundering

Cryptocurrency is often wrongly associated with money laundering, especially by anti-crypto politicians. However, the truth is that most of all laundered money goes through the traditional banking system.

A new report by cryptocurrency exchange Binance has taken a deep dive into money laundering. It is part of an effort to debunk the misconceptions regarding the involvement of cryptocurrencies.

Furthermore, the report cited statistics from renowned analytics firms and the United Nations to support its argument. Crypto detractors will either claim that cryptocurrency is worthless or only used by criminals for money laundering. They could not be further from the truth.

Binance CEO Changpeng Zhao unveiled the findings in a tweet on May 31.

No, Crypto Is Not a Haven for Money Laundering

A Chainalysis report revealed that just 0.15% of crypto transactions were associated with illicit activity in 2021. There are hacking groups such as Lazarus that use crypto for ransoms. However, these represent a tiny fraction of the overall transaction volume.

Additionally, the UN estimated that between 2% to 5% of global GDP in traditional fiat cash is involved with money laundering. This works out at between $800 billion and $2 trillion per year. Furthermore, the figures dwarf the entire crypto market capitalization, which is just $1.3 trillion.

Cryptocurrency is not a suitable medium to launder money for several reasons:

  • KYC is quite stringent in the crypto industry.
    Opening a bank account with fake identification documents at small local banks is easier. Big crypto exchanges now demand much more personal information.
  • Difficult to move large sums.
    Attention will come to those moving large sums of money.
  • Crypto transactions are traceable.
    Transaction data is stored on the immutable ledger, which can be tracked. Privacy coins can also be tracked, unlike cash.

The report concluded:

“It’s an “inconvenient truth” for those that are anti-crypto that the overwhelming majority of all money laundered goes through the traditional banking system, not crypto.”

Big Banks Fined

Last year was a big one for anti-money laundering fines for banks. According to research, 2021 was another massive year for AML-related fines.

Furthermore, the total amount in AML fines for the year was $2.7 billion, with 80 banks and institutions fined. Some of the most significant penalties were for major banks. These include AmBank, ABN Amro, Capital One, Deutsche Bank, Julius Baer, DNB ASA, and Apple Bank for Savings, according to Forbes.

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