An estimated $22.2 billion was laundered globally using cryptocurrencies in 2023, marking a significant decrease from the $31.5 billion recorded in 2022. This 29.5% drop in illicit transaction volume outpaced the overall decline in crypto transactions.
The reduction comes amid evolving money laundering techniques and shifting destinations for illicit funds in the cryptocurrency ecosystem. Despite the overall decrease, certain laundering methods have seen troubling growth, particularly through cross-chain bridges and specialized laundering services.
Bridge Protocols See Alarming Growth
Bridge protocols, which allow transfers between different blockchains, received $743.8 million in crypto from illicit addresses in 2023, more than doubling from just $312.2 million in 2022, according to analysis by blockchain intelligence firms.
Centralized exchanges remain the primary destination for illicit funds. Just 109 deposit addresses received over $10 million each, collectively handling $3.4 billion in illicit crypto last year.
The trend has continued into 2024, with nearly $234 million in illicit inflows through bridges already documented. “Crypto bridges, which facilitate the transfer of assets between different blockchain networks, have become popular tools that enhance the cross-chain interoperability and use cases of certain assets,” experts note.
Unique Laundering Challenges
Cryptocurrencies present distinct challenges for anti-money laundering efforts. “Cryptocurrencies are anonymous at their point of creation therefore the placement stage of the money laundering process is often absent,” explains the United Nations Office on Drugs and Crime.
Mixing technologies have become increasingly sophisticated, combining coins from multiple users to obscure their origins. These services blend and split funds multiple times, making tracing nearly impossible for investigators.
Over 50% of illicit funds eventually cash out through centralized exchanges, with a high concentration in just five exchanges handling the majority of these transactions.
Criminal Services Evolve
Perhaps most concerning is the professionalization of crypto-based money laundering. “Money laundering networks specialised in large-scale money laundering as-a-service have adopted cryptocurrencies and are offering their services to other criminals,” reports Europol.
Fraud remains the most frequently identified predicate offense involving crypto. But cryptocurrencies are also widely used to launder proceeds from ransomware, dark web marketplaces, and drug trafficking operations.
As enforcement agencies and regulators work to address these evolving threats, the cat-and-mouse game between criminals and authorities continues. Despite the overall decline in crypto laundering volumes, the increasing sophistication of laundering techniques presents an ongoing challenge for the global financial system.