Despite growing concerns about crypto crime and sanctions evasion, fiat is still king when it comes to illicit trade rather than Bitcoin.
Earlier this month, the US Treasury Department released a three-year report on money laundering, terrorist financing and arms sales – all of which cover virtual assets.
The Ministry of Finance notes that fiat currencies and traditional methods are still much more commonly used than cryptocurrencies in the illicit finance sector.
The Treasury Department says “virtual assets” are an ever-evolving world in money launderers’ toolkit to hide their money.
The Treasury Department specifically called DeFi and “anonymization-enhancing technology” potential culprits.
Virtual assets are believed to have played a key role in phishing and ransomware attacks throughout the pandemic.
The nefarious use promises of high returns from the volatile cryptocurrency market to lure victims into revealing their personal information or install malware on devices.
Overall, the report claims that the use of cryptocurrencies as a method for money laundering is on the rise.
This corroborates a recent Chainalysis report showing that more funds have been sent to criminal blockchain addresses by 2021.
However, the Treasury Department acknowledges that fiat is still king when it comes to crime. “The use of virtual assets for money laundering is still far below that of fiat money and traditional methods,” they stated.
Furthermore, while crypto crime is on the rise, Chainalysis also finds that the share of illicit funds in crypto is at an all-time low, representing just 0.15% of total transactions.
This is down from 0.62% in 2020 and 3.37% in 2019.
P2P transactions and anonymous wallets can help users evade financial controls. However, most blockchains – including Bitcoin – use a very transparent public ledger, which can make it easier to track down criminals.
Illegal trading using cryptocurrencies has become a hot topic since the end of the year, as western officials worried about Russia’s use of cryptocurrencies to evade sanctions.
Tom Robinson – CEO of blockchain analytics firm Elliptic – noted that cryptocurrency “can and will be used to evade sanctions,” but is not a “silver bullet.”