A fresh report from Chainalysis, a blockchain data company, says stablecoins are being used increasingly for bad things, like hiding money. As a result, it’s harder to fight financial crime now that there are more stablecoins.
Some examples are fraudulent activities on the dark web market, stealing platforms, and getting money through crypto scams. Crimes that don’t involve coins are called “off-chain incidents.” Selling drugs and pulling scams come to mind.
“Money Laundering and Cryptocurrency,” a study by Chainalysis, says that more illegal money is being sent through stablecoin wallets. This proves that Chainalysis was right that most illegal deals use stablecoins.
Grauer said there is no pure connection between stablecoins and breaking the law. The study does find that both real and fake users like stablecoins because their value doesn’t change with the market.
Some crooks may be using stablecoins to set up large-scale money laundering networks, which may also explain the rise in the use of stablecoins for money laundering. Alan Orwick, co-founder of Quai Network, said sanctioned organizations are a big reason for illegal transactions. He said they are involved in $14.9 billion worth of illegal activities, which is 61.5% of all.
Although stablecoins are being used more and more to hide money, they are not explicitly designed to be used for illegal actions. Grauer said that people who make stablecoins can freeze funds that look sketchy, and this has been done.
Chainalysis Stricter Rules Needed To Combat Illicit Stablecoin Trades
Jonathan Thomas says that tighter rules are needed to stop the sale of stablecoins without permission. However, one good way to do this is to stop or block funds. Thanks to the Travel Rule, the EU’s Fifth Anti-Money Moving Directive, and other rules, moving money is now against the law.
Tether banned addresses linked to PDVSA, Venezuela’s state-run oil company after it was said that the company was using Tether to circumvent rules that stopped it from exporting fuel and crude oil. Thomas said that the people who make stablecoins track how they are used to thwart money meant to harm.
Grauer said that looking at data can help find middlemen’s wallets, which hold a lot of money connected to illegal actions. Wallets like these often get cryptocurrency from multiple sources and store it all in one place.
Jonathan Thomas also said stricter rules are needed to stop illegal stablecoin trades, even though stopping or blocking funds is a great way. The Travel Rule, the Fifth Anti-Money Moving Directive from the EU, and other rules that stop people from moving money are all important steps forward.
Protocols for Better Know Your Customer (KYC) and Anti-Money Laundering (AML), methods for monitoring transactions, and blockchain intelligence tools keep the blockchain safe and criminals from being able to do anything. Grauer still thinks that less money laundering will happen on the blockchain. She did say, though, that it’s hard to tell the short-term trends because rules around the world are still changing.
