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$88.6 Million in Ill-Gotten Funds Laundered Using Crypto Exchanges


One of the reasons why Bitcoin and cryptocurrencies need to be regulated according to regulators is due to the possible use of digital currencies in illicit activities. Individuals and groups involved in money laundering and criminal activities take advantage of the crypto market’s lack of regulatory clarity and anonymity.

In fact, there are some coins that have become more popular for providing anonymity. For this reason, Japan has even called to ban such coins in their crypto exchanges.

$88.6 Million in Ill-Gotten Funds

According to a recent Wall Street Journal investigation, it has been discovered that around $88.6 million ill-gotten funds have been transferred using crypto exchanges. Around $9 million of ill-gotten funds were funneled via ShapeShift.

ShapeShift is a Switzerland-based crypto exchange established by Erik Voorhees in 2014. What exactly makes this a great option for those who are transferring ill-gotten wealth? Unlike other crypto exchanges, ShapeShift allows users to stay anonymous when they are trading Bitcoin. This means that police can track but can’t pinpoint the individuals or groups behind each transaction.

The investigation of WSJ involved a computer program that tracked funds that came from 2,500 suspected investment frauds and alleged crimes that made use of Bitcoin and Ethereum. According to WSJ, criminals took advantage of ShapeShift’s services that convert Bitcoin to Monero, a cryptocurrency known for its anonymity.

Voorhees doesn’t believe that “people should have their identity recorded to catch an occasional criminal”. WSJ then provided the list of suspicious addresses to ShapeShift. Veronica McGregor who works as the chief legal officer of the crypto exchange told WSJ that ShapeShift already banned those accounts and even mentioned that they will already start requiring user identification starting October 1. McGregor said that though Voorhees views that there should be an anonymity policy doesn’t mean that it reflects the view of the entire company.

McGregor said that “just because it’s the personal philosophy of the CEO doesn’t mean that’s how the business is going to be run. He’s not pro-money-laundering”. ShapeShift is looking to introduce ID requirements for traders gradually. In fact, ShapeShift has introduced a new rewards program this month. This will eventually become mandatory membership model for all users of the crypto exchange and will require the provision of providing “basic” personal information.

Less than One Percent of BTC Transactions

Should regulators be concerned regarding the possibility of Bitcoin being used in illegal activities? UK-based blockchain intelligence company Elliptic has partnered with a Center on Sanctions and Illicit Finance and released a report on January entitled “Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services”. it has discovered that less than one percent of all transactions were used in illegal activities.

It has also been discovered that crypto exchanges, online gambling websites, as well as coin mixers were used by criminals in order to launder Bitcoin.

Considering the changing times and the regulatory adjustments being made by regulators, do illicit activities affect how cryptocurrencies are going to be legitimized in some parts of the world? Or do existing KYC/AML regulations be enough to police the industry for any illicit activities?

Janneke Eriksen

Janneke is a writing ninja and has vast experience in journalism, specifically in the crypto space. As a blockchain believer and avid Bitcoin fan, she’s incredibly excited to share to our readers the latest news around so they are always updated wherever they are.