Cryptocurrencies and money laundering: why are cryptocurrencies attractive to money launderers?

Money laundering is the "cleansing" of money from illegal activities in such a way that the origin of the money cannot be traced.

Cryptocurrencies, such as Bitcoin and others, have become popular among money launderers because of certain features that make it easier to channel illicit money through the traditional financial system.

Anonymity

One of the biggest attractions that cryptocurrencies offer to money launderers is anonymity.

Although cryptocurrency transactions are public and can be traced on the blockchain, the identity of the owners of the wallets associated with the transactions is often unknown. This level of anonymity allows money from illegal activities to be moved without easy traceability to the source.

Global and cross-border

Cryptocurrencies are global and know no geographical boundaries.

This means that money can be moved quickly and easily between countries without having to face the constraints of traditional financial systems or the rules on cross-border transfers.

Decentralisation

Cryptocurrencies are decentralised, which means that there is no central authority or institution to oversee transactions.

This feature is an additional attraction for money launderers as there is no single point at which regulators can block or restrict transactions.

Lack of regulation

In many countries, cryptocurrency markets are not regulated in the same way as traditional financial markets.

The general absence of cryptocurrencies in anti-money laundering and counter-terrorist financing regulations means that money launderers can easily exploit this gap.

Cryptocurrencies represent a significant challenge in the fight against money laundering. However, regulators globally are increasingly recognising the money laundering potential of cryptocurrencies and are introducing rules to prevent such activities.