Elliptic Bitcoin Laundering Analysis

Bitcoin, which was the first crypto coin in the world that has long had the reputation as a fringe economic tool, finally went mainstream a while back. This was after its price shot from just a few hundred dollars to almost $20 thousand at its peak.

This skyrocketing price made Bitcoin a global phenomenon with even the most accomplished economists getting in on the discussion. When Bitcoin was released in 2009, its price was less than that of one US penny. Now, less than a decade later, the price has jumped to over $15,000. Today, it has a market cap of over $200 billion.

Criminals Like It

When Bitcoin rose in value, criminals began to see it as having properties that enable them to evade law enforcers. However, much of what is known about the illicit use of Bitcoin is based on anecdotes. There is usually no hard data to support the claims. Besides that, they do not display any trends over time to support their analysis.

To be able to get a clear picture of the illicit use of Bitcoin, the Center on Sanctions and Illicit Finance, a program started by the Foundation for Defense of Democracies partnered with Elliptic, conducted an analysis service for digital coins to study data from the Bitcoin blockchain.

The data would give policymakers insight and leaders in the financial industry who want to understand the risks arising from the use of digital coins. With this data, they will be able to come up with guidelines that help them combat terrorism funding, and stop money laundering.

How the Study Was Conducted

The analysts looked at a narrow data sample from 2013 to 2016. They were able to identify the flow of bitcoin from sources that were easy to identify. The study found that less than one percent of all bitcoin was used for money laundering. They were even able to discover how illegal bitcoin was being laundered.

According to the study findings, the majority of illicit bitcoin was laundered via the darknet, specifically on AlphaBay and Silk Road. Bitcoin exchanges were also found to be the majority recipient of all conversion services. However, they also processed most of the transaction on the bitcoin blockchain as well.

In geographical terms, the conversion services in Europe were the recipient of most illicit bitcoins. These levels were at five times higher than those in North America were. Besides that, although Asian countries show a huge volume of transactions, they accounted for only a small amount of all laundered bitcoins. However, it is also worth noting that conversion services, which receive illicit Bitcoin, conceal the country of origin. This makes it hard to identify them.

Recommendations

Although it is impossible to get rid of laundering in digital currency or another country in total, there are measures that can be taken. For one, financial authorities must increase AML enforcement at mixers and gambling sites.

Besides that, the authorities need to educate the public on how vulnerable they are on darknet sites; shutting them down does not work since another one will just arise.

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