This post was initially shared on Twitter in the Spring of 2023. It's been updated as of February 2024 with updated figures and visuals and rewritten for clarity and formatting.
There's been a lot of political activity directed toward the crypto space in recent weeks. Many legislators believe that cryptocurrencies are primarily a means of money laundering and illicit activity.
Let's start by defining money laundering so we're all on the same page.
From Wikipedia: is the process of illegally concealing the origin of money, obtained from illicit activities such as drug trafficking, corruption, embezzlement, or gambling, by converting it into a legitimate source. It is a crime in many jurisdictions with varying definitions. It is usually an essential operation of organized crime.
Really bad stuff!
Money laundering is a global issue with links to terrorism, gangs, and other bad guys. It's also something that affects both crypto economies AND fiat.
In fact, According to the United Nations (a reasonably reputable source), the estimated amount of money laundered globally in one year is $800 billion-$2 trillion in current US dollars.
The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Due to the clandestine nature of money laundering, it is, however, difficult to estimate the total amount of money that goes through the laundering cycle. — United Nations, Office of Drugs and Crime
Now, if you're sitting there thinking, “Wow, that's a lot of money," that's because it is! Those estimates account for roughly 2-5% of global GDP.
Every year.
With all the ruffled feathers about cryptocurrencies being a haven for money laundering, these numbers would likely pale compared to all the illicit activity happening in crypto!
So, I had a look! It should be pretty straightforward, given the transparent nature of blockchain technologies.
According to a Chainalysis (a blockchain data platform) report, in 2023, illicit addresses sent $22.2 billion worth of cryptocurrency to services.
In 2023, illicit addresses sent $22.2 billion worth of cryptocurrency to services, which is a significant decrease from the $31.5 billion sent in 2022. Some of this drop may be attributed to an overall decrease in crypto transaction volume, both legitimate and illicit. However, the drop in money laundering activity was steeper, at 29.5%, compared to the 14.9% drop in total transaction volume. — Chainalysis, 2024
For visual learners, here's a side-by-side comparison:
The staggering scale of fiat money laundering dwarfs crypto by orders of magnitude, with estimates ranging as high as $2 trillion.
It is essential to bear in mind the following points while comparing the two, especially since regulators prioritize a problem that cannot be compared to fiat economics.
Some may argue that cryptocurrency is an ideal money laundering tool due to its anonymity. However, the reality is that most cryptocurrencies are transparent and traceable.
Cryptocurrency exchanges and blockchain analytics companies are developing sophisticated tools to track and identify illicit activities. These efforts make it increasingly difficult for criminals to use crypto for money laundering and hide it.
Ex. 1: Etherscan
etherscan.io
https://etherscan.io/
In contrast, fiat-based systems are significantly more challenging to monitor and regulate. To avoid detection, money launderers can employ various tactics, including offshore accounts, shell companies, and cash transactions.
For example, Wachovia Bank, HSBC, Benex, Westpac, etc.
The Five Biggest Money Laundering Scandals
https://sanctionscanner.com/blog/the-five-biggest-money-laundering-scandals-317
Are you a cryptocurrency enthusiast wondering why regulators are taking a bearish stance towards the industry? If so, speak up, share facts, and engage with officials in productive conversations.
The future of the industry may depend on it.
Sources:
https://en.wikipedia.org/wiki/Money_laundering
https://www.unodc.org/unodc/en/money-laundering/overview.html
https://sanctionscanner.com/blog/the-five-biggest-money-laundering-scandals-317
https://sanctionscanner.com/blog/the-five-biggest-money-laundering-scandals-317