Despite rising concerns about cryptocurrencies being rampantly used by criminal activities such as money laundering, fiat is still way ahead in terms of being the prefered choice for illegal activities, claims a newly published report by the US Treasury Department. The federal department of the US government released three-yearly reports earlier this month, covering common criminal activities like money laundering, terrorist financing, and proliferation financing where the body notes that fiat currency and traditional networks are still far more commonly used than crypto in illicit finance.
The findings by the Treasury mention virtual currencies in detail, noting that the number of users and the market capitalisation of digital assets have increased significantly since the previous risk assessment in 2018.
The US Treasury clarified that "the use of crypto assets for money laundering continues to be significantly less prevalent than the use of fiat cash and other more traditional means."
While investors have taken to crypto because of its decentralised nature, it is one of the main reasons that the asset class is also used for illegal activities. Money Laundering using cryptocurrencies is a big concern among authorities, while the use of crypto as ransom demands is also another area of concern.
According to the US National Money Laundering Risk Assessment report, “virtual assets” are an ever-evolving domain within money launderers with an ever-expanding arsenal of ways to hide their finances. It specifically names decentralised finance (DeFi) and "anonymity-enhancing technology" as potential culprits.
Over the course of the pandemic, virtual assets have apparently been used extensively in phishing attacks and ransomware scams. Illicit operators have made use of pledges to eventually lure victims into revealing personal information or infecting their devices with viruses. The attackers can then demand payment in crypto, which is both pseudonymous and immutable.
Since transactions are irreversible in the crypto space, they are used as an advantage by criminals. Money laundering costs the global economy anywhere between $800 billion (roughly Rs. 60,90,016 crore) to $2 trillion (roughly Rs. 1,52,24,100 crore) every year, as per a United Nations estimate and the worst part is that 90 percent of it is undetected.
The published US Treasury report seems to fall in alignment with a recent Chainalysis crime report, which said that more funds were sent to criminal blockchain addresses in 2021 than any other year.
That said, Chainalysis also finds that the share of illegal money in crypto accounts for only 0.15 percent of all transactions in 2021, dropping from 0.62 percent in 2020 and 3.37 percent in 2019.
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