Research by Chainalysis has found that stablecoins are increasingly replacing Bitcoin as the digital currency of choice for carrying out money laundering schemes. The crypto analysis firm claimed that these fiat-pegged tokens were used in nearly 63% of money laundering transactions in 2024.
The Chainalysis report claims that stablecoins are mainly preferred because they are easier to send money abroad. You can also trade informally without verifying your identity. The report states that stablecoins are a new “back account” for criminal organizations.
“Back Account” is the last drop account from which funds transferred across multiple accounts are withdrawn. The account where a deceived victim first deposits money is called a “front account.”
The report claims that until 2021, Bitcoin was used almost exclusively for various money laundering crimes. However, stablecoins have recently become difficult to track, especially across borders. With the growth of stablecoins, the illegal use of stablecoins has also increased.
FATF supports Chainalysis findings
The Financial Action Task Force (FATF) reported in June that the use of stablecoins by criminals has increased significantly since last year. The FATF also claimed that the majority of illegal activities on blockchain involve stablecoins.
The United Nations Office on Drugs and Crime (UNODC) also released a report in January claiming that Tether (USDT) is the most popular currency for criminal organizations in Southeast Asia. The main reason stablecoins have been used to launder the proceeds of criminal activities is their versatility. UNODC noted the difficulty of smuggling fiat currency abroad. Converting them in South Korea is even more difficult.
Chainalysis report also Found Converting the proceeds of crime into stablecoins will facilitate cross-border remittances. Money launderers can avoid exchanges by using overseas virtual currency exchanges that do not require KYC (Know Your Customer) verification. OTC (over-the-counter) trading is also available.
The report noted that while stablecoins are essentially traceable, their decentralized nature allows them to avoid government control. Additionally, he pointed out that while transactions can leave a trace, crypto wallets use randomized alphanumeric characters, making them difficult to trace. Tumblecoins and mixed stablecoins are even more difficult to track.
Stablecoin-related scams are rapidly increasing in South Korea
Report too Found Criminals in South Korea are reportedly turning to stablecoins for the so-called “Oda Jangip scam.” This scam begins with false advertisements in online shopping stores and second-hand goods markets to defraud unsuspecting buyers out of money.
Stablecoins are used to launder proceeds from small-scale fraud (hundreds of thousands of dollars) and large-scale fraud (hundreds of millions of dollars or more).
However, the report suggests that criminals involved in stablecoin-related crimes often receive lenient penalties. Chainalysis cited the example of a criminal who laundered more than $188 million while working for a voice phishing organization in January. The culprit, whom the analysis firm has designated as Person A, bought Ethereum and transferred it to an overseas cryptocurrency exchange.
The ETH was then exchanged for USDT and transferred to a crypto wallet controlled by Ring. The money laundering process started with domestic bank accounts, ETH, foreign cryptocurrency exchanges, stablecoins, and cryptocurrency wallets. However, the culprit received only one year and six months in prison, which was suspended for three years in August.
Another criminal who defrauded a victim who bought perfume on the second-hand market was sentenced to eight months in prison, suspended for two years, according to reports. The criminal received 220,000 won in deposits from customers through a fake bank account and converted it into USDT.
The report noted that financial fraud organizations using stablecoins primarily use tactics such as voice phishing, stock/coin “leading room” scams, and second-hand market scams. Next, they look for ways to clean the proceeds and withdraw them as cash.
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