• B Vrettos and M Bacina

Crypto crime concentrated in 270 connected wallets


Reading articles on digital currency in the business press, you would be forgiven for thinking that digital currency is just used by criminals and money launderers. This (regretfully widespread) narrative is increasingly crumbling in the face of facts. The way public blockchains work, however, provide a good basis to publicly track and identify dirty money, something which is not possible with traditional cash or payments.


The recent Chainalysis 2021 Crypto Crime Report covers off just this kind of information, reporting, that despite digital currency use soaring:-

Cryptocurrency-related crime is falling, it remains a small part of the overall cryptocurrency economy, and it is comparatively smaller to the amount of illicit funds involved in traditional finance.

Chainalysis is a major provider of digital currency investigation and monitoring tools used by leading exchanges. Chainalysis develops its reports by tracking and identifying the pseudonymous (that is not anonymous) digital wallets which transacting digital currencies, creating what they say is the largest database of tracking information for digital currency flows.


A surprising finding in the current report concerns just how few addresses are involved in the majority of money laundering, specifically only:

270 service deposit addresses drive 55% of money laundering in cryptocurrency

A deeper look into these wallets leads Chainalysis to consider that the wallets have very significant legitimate activity. Often, the volume of legitimate digital currency received by these illicit addresses is 90% of the total volume of digital currencies in those wallets. That is only 10% of the volume of payments is dirty money.


This suggests that these addresses are in fact legitimate businesses which may have AML/CTF or other compliance failures which place them at risk of money laundering. If the operators of these addresses engage in robust AML/CTF monitoring and enforcement, it may be that a key part of the already small money laundering which goes on in digital currency can be further crimped.


Uncovering and stopping the sources of illicit funds connected to crime is important for any payments system, and the increasing sophistication of law enforcement agencies in understanding digital currency and moving to stop crime and laundering in the space is both welcome and important for the ongoing development and adoption of this technology.

© Michael Bacina. All rights reserved

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