Bitrace Links Stablecoin Price Fluctuations to Money Laundering Activities
Summary:
Blockchain research firm Bitrace has discovered irregularities in stablecoin prices, especially Tether (USDT), linked to money laundering activities. The report outlined two scenarios, "upward" and "downward", demonstrating how stablecoins are used for money laundering, either trading above or below market prices. These techniques exploit platforms with weak Anti-Money Laundering/Know Your Customer (AML/KYC) protocols and expose loopholes in the current legal framework around digital assets.
Bitrace, a blockchain research firm, has discovered that money laundering activities could be a factor contributing to the irregularities in stablecoin prices, specifically, Tether (USDT). Money launderers might trade USDT at prices that are either higher or lower than the market prices, dependent on prevailing conditions. The findings were published on Dec. 26th by Wu Blockchain on Medium, translating Bitrace's report. Two potential instances of stablecoin usage for money laundering were outlined in the report. In the first scenario labeled "upward", wrongdoers sell a stablecoin to money launderers at standard price, and then repurchase a different stablecoin at an inflated price. This difference operates as payment for the money laundering services. The report highlights that illegal USDT transactions might price the stablecoin between 8-10 Chinese yuan (RMB). At present, 7 RMB is equivalent to 0.98 US dollars.
The second scenario tagged "downward" includes instances where the stablecoin is used legitimately on various platforms that don't have robust Anti-Money Laundering/Know Your Customer (AML/KYC) protocols. “In these cases, some payment platforms act as intermediaries, accepting USDT deposits and using real currency to facilitate payments on other platforms." These could include online gambling platforms, e-commerce platforms, or even payroll platforms. In these circumstances, sellers of "downward" stablecoins face smaller risks of "reverse freezing", a process which blocks accounts that accept crypto associated with criminal activities. Here, USDT may be sold at a 0.05 to 0.3 RMB discount.
The Bitrace research utilized the analysis of USDT frozen by Tether and the OKX platform for illustrative purposes. The identified criminal group used "prominent cryptocurrency exchanges such as FTX, Binance, and OKX" but also transferred stablecoins to "centralized trading platforms, payment platforms and even online gambling platforms." The study underscores that these criminal groups use stablecoins for all their transactions and avoid direct dealings with flat money. It is worth noting that, under US law, Article 12 of the Uniform Commercial Code, currently pending state-level approval, would offer protection to users' claims to digital assets accepted in good faith, even if these assets have been previously involved in criminal activities.
US law enforcement is actively collaborating with Tether to tackle this issue, as reported by Bitrace. The report was initially issued on Dec. 17.
Published At
12/27/2023 12:29:50 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.