Massive Money Laundering Cloud Looms Over Bitcoin
The lack of regulation in cryptocurrency has always been a major source of concern since it means illegal money dealings can take place. Well, it looks like that is already a reality according to a new report released jointly by Center on Sanctions & Illicit Finance and Elliptic.
The recent report states that the laundering of bitcoin for illegal drug deals has been a highly centralized process. The report was written by Tom Robinson and Yaya Fanusi and it points out that most of the illegal bitcoin transactions took place through Mixers.
A section of the report reads: “Mixers have consistently processed about a quarter of incoming illicit Bitcoins per year. The proportion laundered through exchanges and gambling combined has been roughly constant (66 to 72 percent). Of note, Bitcoin exchanges processed 45 percent of laundered Bitcoins, but, as they received much higher volumes, a much lower proportion of their activity is illicit.”
The report also revealed that most of the gambling and mixer laundering schemes have been taking place in three cities, thus the centralization. It also stated that these mixers have been handling about 97 percent of the processed volume within their categories and about 50 percent overall volume.
The growing involvement of cryptocurrencies in money laundering and other illegal activities such as drug sales was the reason behind the Metropolitan Bank’s recent decision to suspend all international transfers involving bitcoin.
The Metropolitan Bank was one of the early adopters of cryptocurrency, even earning itself the nickname “Bitcoin bank.” This is because has been allowing investment firms and cryptocurrency companies to make deposits and wire transfers using Bitcoin and it also one of the U.S banks registering high growth numbers. The bank notified its customers that it would halt cryptocurrency transfers though it has not made any public announcements over the matter.
The move by the Metropolitan Bank highlights the growing concern over the use of cryptocurrency to in illegal trades. The Chinese government has been quite vocal about the issue and has even taken steps by banning cryptocurrency trading, mining, and Initial Coin Offerings (ICOs).
It is not clear how powerhouse such as the U.S plan on handling such issues especially since it involves a decentralized system. The Metropolitan Bank has not given any word on whether it plans to resume the use of cryptocurrency. There have also been concerns that the bans being issued against cryptocurrencies might lead to the death of cryptocurrencies though it is just speculation. Digital currencies have proven to be quite useful and practical which is one of the reasons they exist.