Cryptocurrency and money laundering
The advent of unprecedented cryptocurrency bubble boom in 2017 bought huge popularity to
the term ‘Bitcoin’ and after that crypto world has never been the same . Bitcoin is a
cryptocurrency invented in 2008 rumoured to be developed by a person under signature name
Sataoshi Nakamoto. It is a decentralized digital currency without any regulator that can be
sent from user to user on the peer-to-peer cryptocurrency network without any need for the
third party. All Transactions are checked by network nodes with the help of cryptography and
recorded in a public distributed ledger called a blockchain. Bitcoins are made as a prize for a
process known as mining. They can be exchanged for other currencies, products, and
services available on over the internet.
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Usage of bitcoin in money laundering
With the several advantages over the liquid money like user autonomy, discretion, peer-topeer Focus, elimination of banking fees, very low transaction fees for international payments
etc. the bitcoin is now widely accepted. The developing countries are open minded when it
comes to cryptocurrency. But many contradict the idea of legalization of cryptocurrency
which is because its feature of user autonomy and being anonymous. Due to it, bitcoin is
heavily used to carry out illegal activities by the perpetrators in the cyber world. The places
like Darknet mainly allow trade in bitcoin and other cyrtocurrencies. Therefore the myriad
usage of bitcoin is money laundering which brings bad name and fame associated with it.
To launder money the criminals create online accounts to lure the victim which are very
difficult to recognize. Then, they originate a ‘cleansing’ process i.e., moving money into the
cryptocurrency system by the use of mixers, tumblers, and chain hopping .Money gets moved
from a cryptocurrency into another, across digital currency exchanges to create a money trail
that is almost impossible to track. They even use private coins, cryptocurrencies specially
made to increase and appreciate anonymity, such as Zcash. At the time of cleansing,
criminals use tumblers to hide actual addresses and make it difficult for investigators to
follow the transaction’s path. They conceal the origin and receipt of cryptocurrencies by
stirring up some amount of cryptocurrency with other cryptocurrencies, and then send smaller
units of cryptocurrency to a targeted address, summing up the original money minus one to
three percent. Then the ransoms are placed into the real financial system. If we look at stats
then according to the several reports online hackers and predators even use theft and
gambling to launder bitcoin and other cryptocurrencies.
In 2019, alone, $4.26 billion have been stolen from exchanges and users by hackers. In
addition, money laundered by bitcoin and other cryptocurrencies was above $761 million in
the period of 2018-19, a number that includes only the laundering of stolen funds, not a
complete estimation of all the dark market money using cryptocurrencies. Therefore,
cryptocurrencies have now become a mandatory challenge for financial models
implementers and anti-money laundering programs. While investors are active in the market,
regulations are still in the ongoing in maximum number of countries. The work to deanonymize cryptocurrencies has led to the making of new coins that are less anonymous
and to the emergence of tools to look and control transaction records of existing coins to
identify user.
For governments like India, the regulation of cryptocurrency would add legitimacy to the
currency transaction, but for others, it is not considered to be a problem. The huge financial
potential of the cryptocurrency industry is clearly evident and it is an fortunate moment for
the regulatory authorities, in consultation with the government and the stakeholders
concerned, to adopt a fresh outlook towards the regulation of the cryptocurrency in India.
Also large-scale regulation could adversely affect the decentralization of cryptocurrency, but
some norm seems to be mandatory to legitimize the market. These smartly designed
regulations can protect not only the authority even also the traders and can prevent market
manipulation. Keeping in mind the above things an impactful strategy is needed to come up
with in the contemporary cyber world. As the world will proceed and evolve so will the
complexity of cryptocurrency but with adequate measures this can be handled properly.
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Solution to crytocurrency maundering
Despite of the complex level of anonymity, to launder money criminals has to exchange their
cryptocurrency for original currency at some point. The analysis of these transactions, within
and across blockchains, can lead to the de-anonymization of criminals and put them behind
the bars easily. The platforms that use the blockchain exclusively provides all the regulators,
auditors, and other stakeholders an efficient and effective set of tools to monitor complex
transactions and regularly record the audit trail of dubious transactions across the system. As
all the information is carried out in the blockchain and available to each node, suspicious
activity can be examined by all the related ways.
A variety of solutions can be used to money laundering involving cryptocurrencies: AML
procedures can be strengthened at financial institutions; transaction monitoring can be
used and regulations can be improved; cryptocurrency exchanges can be regulated, even
advanced third-party identity providers can be placed under state supervision digital
exchanges offering to purchase primary cryptocurrencies; blockchain can be used as a
solution i.e. a blockchain is maintained on an online public ledger, which helps in the
supervision, validation, and recording of the whole history of each transaction.
The cryptocurriences that are less traceable usually rise the concerns about money laundering
and criminal activities. This provides a better way of going to the legalised market compared
to anonymous cryptocurrencies, especially if backed by national governments. It is also
possible that a variety of coins will survive while targeting different markets and traders.
Therefore, AML programs must ensure that their investigators have a lucid understanding of
this mushrooming market while using the appropriate technology to effectively investigate
any suspicious activity.
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Conclusion
Analysing and gathering all the facts and figures together it is evident that the money
laundering via the cryptocurrency has widely increased in the last few years. As the numbers
of cases are exponentially increasing, the need of time is a good strategy to counter attack the
hackers and criminals of the cyber world. Also, the world of cryptocurrency cannot be
completely de-centralized as then cryptocurrency may lose its essence but a regulated form
can make cyber world more safe place to reply on for our daily needs.