Crypto Journalist

Anas Hassan

Crypto Journalist

Anas Hassan

About Author

Anas is a crypto native journalist and SEO writer with over five years of writing experience covering blockchain, crypto, DeFi, and emerging tech.

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Last updated: 

August 29, 2025

US financial institutions processed $312 billion in suspicious transactions linked to Chinese money laundering networks between January 2020 and December 2024, according to a new FinCEN analysis of 137,153 Bank Secrecy Act reports.

These surprisingly unexpected big figures emerge as crypto exchanges face intensified regulatory scrutiny for money laundering, despite traditional banking systems handling vastly larger volumes of illicit funds.

Chinese money laundering networks have established sophisticated partnerships with Mexico-based drug cartels, exploiting currency restrictions in both countries.

Mexican currency laws prevent large dollar deposits in local banks, while China’s currency controls limit overseas transfers by its citizens. This regulatory gap allows cartels to sell illicit dollars to Chinese nationals seeking to circumvent Beijing’s capital controls.

The networks extend beyond drug trafficking into human trafficking, healthcare fraud, and real estate purchases worth $53.7 billion in suspicious activity.

FinCEN identified 1,675 reports involving human trafficking and 43 reports covering $766 million in suspicious adult day care center activity in New York alone.

Banks Handle Bulk of Criminal Money While Crypto Faces Heat

Banks accounted for $246 billion of the total suspicious transactions, while money service businesses handled $42 billion and securities firms processed $23 billion.

The average annual flow through US banking systems reached $62 billion from Chinese money laundering operations alone.

Historical cases reveal systematic banking vulnerabilities to criminal exploitation.

Wachovia Bank laundered $350 billion for Mexican drug cartels between 2007 and 2010, receiving only a $160 million penalty despite the massive scale.

Danske Bank processed $228 billion in suspicious transactions from Russia between 2007 and 2015, ignoring internal warnings throughout the period.

Similarly, HSBC paid $1.9 billion in 2012 for allowing drug cartels to transfer hundreds of millions through accounts, with criminals using specially designed cash deposit boxes that fit perfectly into bank slots.

TD Bank agreed to pay over $3 billion after prosecutors found the institution had been used to launder more than $470 million through Chinese networks in New York and New Jersey.

In fact, dating back to 2021, the 1MDB scandal involved over $1 billion stolen through global banking networks, with funds used to purchase luxury real estate, yachts, and artwork across major cities.

Bank of Credit and Commerce International laundered billions for drug cartels and corrupt governments before its 1991 closure forced stricter international banking regulations.

Criminal organizations recruit bank employees as complicit insiders and use counterfeit Chinese passports to facilitate account openings.

Money mules often report occupations as “student,” “housewife,” or “retired” during onboarding to explain large transaction volumes that are inconsistent with their stated professions.

Regulators Target Crypto Despite Minimal Illicit Activity Share

Cryptocurrency transactions represent ‘less than 1%’ of total money laundering activity globally, according to TRM Labs.

In fact, Chainalysis data shows illicit crypto volumes totaled approximately $189 billion over five years, compared to over $2 trillion laundered annually through traditional financial systems worldwide.

Despite this disparity, regulators are intensifying their enforcement actions against crypto.

Most recently, Binance Australia was required to appoint an external auditor within 28 days after AUSTRAC identified “serious concerns” with its anti-money laundering controls.

French authorities have also launched investigations into Binance over alleged violations, while European regulators are considering penalties against OKX following $100 million in allegedly laundered funds.

Australian enforcement expanded through systematic compliance reviews, with AUSTRAC targeting 13 remittance providers while investigating 50 additional platforms.

The agency cancelled or refused renewals for nine providers that failed to comply with their obligations, contrasting sharply with the limited penalties imposed on the banking sector despite vastly larger suspicious transaction volumes.

Senator Elizabeth Warren continues to demand tougher crypto regulations, stating, “Bad actors are increasingly turning to cryptocurrency to enable money laundering.”

However, FinCEN data reveals that Chinese money laundering networks primarily operate through traditional banking channels rather than digital assets.

Blockchain analytics firm Chainalysis reported illicit crypto transactions reached $51.3 billion in 2024, an 11.3% increase, but still representing a fraction of the $312 billion in suspicious banking transactions identified during the same period.

The Crypto Council for Innovation (CCI) and the Blockchain Association jointly issued a letter on Aug. 20 endorsing Brian Quintenz for Chairman of the US Commodity Futures Trading Commission (CFTC).

In the letter to President Donald Trump, the groups emphasized that confirming Quintenz promptly is critical to advancing his administration’s agenda to foster a “golden age” for digital assets in America.

According to the group:

“Each of our organizations has had the privilege of knowing and working with Mr. Quintenz firsthand, and we can attest to his deep expertise, sound judgment, proven leadership, and integrity.”

They further noted that Quintenz’s experience positions him to guide the CFTC at a decisive moment for US financial markets and the broader digital asset ecosystem.

Their endorsement also frames him as uniquely equipped to implement regulations that support responsible innovation, safeguard market integrity, and maintain American economic competitiveness.

They wrote:

“Mr. Quintenz’s extensive experience and substantive and technical understanding of blockchains, digital assets, and financial markets makes him exceptionally well-suited to lead the CFTC at this critical juncture.”

Quintenz, who was nominated in February, saw his confirmation vote delayed after concerns arose over potential conflicts of interest, highlighted by notable industry figures like the Gemini co-founders Tyler and Cameron Winklevoss.

Pushback against bankers

The same coalition also opposed a recent initiative by US banks to amend provisions in the GENIUS Stablecoin Regulation Act.

In an Aug. 19 letter, the groups argued that the proposed changes would create an uncompetitive environment favoring banks while limiting broader industry growth, innovation, and consumer choice.

Last week, the Bank Policy Institute (BPI) and other banking groups urged lawmakers to address what they described as a legislative gap that prevents exchanges and affiliated firms from offering indirect yields on stablecoins.

The traditional financial institutions warned that this gap could drive up to $6.6 trillion in deposits from the traditional banking sector into digital assets.

However, the crypto organizations countered that payment stablecoins operate under distinct frameworks and should not be treated like bank products.

They stressed that allowing regulated platforms to share benefits with customers is “a feature that promotes financial inclusion, fosters innovation, and ensures American leadership in the next generation of payments.”

Mentioned in this article

Federal Reserve Vice Chair for Supervision Michelle Bowman acknowledged that crypto firms experienced debanking due to regulatory uncertainty.

During the Wyoming Blockchain Symposium on Aug. 19, Bowman also announced a fundamental shift in the Fed’s approach to blockchain innovation.

She revealed the central bank eliminated reputational risk considerations from bank supervision in late June to address barriers preventing financial institutions from serving digital asset companies engaged in legal activities.

The Fed official stated:

“Your industry [crypto] has already experienced significant frictions with bank regulators applying unclear standards, conflicting guidance, and inconsistent regulatory interpretations.”

Bowman emphasized that banks should not face penalties for serving customers conducting lawful business operations, stating that customer selection decisions “lie solely within the purview of bank management” rather than regulatory interference.

Furthermore, she noted the Fed’s transition from an “overly cautious mindset” toward embracing blockchain technology within the traditional banking system.

She warned that regulators must choose between shaping technological frameworks or allowing innovations to bypass banks entirely, potentially diminishing the banking sector’s economic relevance.

The Fed is updating examination manuals and supervisory materials to ensure lasting implementation of the reputational risk removal policy.

Four-principle regulatory framework

The Fed Vice Chair established four core principles guiding the central bank’s new approach to digital asset regulation.

Regulatory certainty tops the list, addressing industry concerns about investing in blockchain development without clear supervisory standards.

Bowman questioned whether companies would partner with banks, knowing that regulatory scrutiny brings uncertainty, rather than pursuing alternatives outside the banking system.

Tailored regulation forms the second principle, requiring supervisors to evaluate use cases based on specific circumstances rather than applying worst-case scenario expectations.

The Fed must recognize unique features distinguishing digital assets from traditional financial instruments while avoiding one-size-fits-all approaches that fail to address actual risk profiles.

Consumer protection represents the third principle, ensuring customer-facing products comply with existing consumer protection laws, including prohibitions against unfair, deceptive, or abusive practices.

Digital asset frameworks must incorporate Bank Secrecy Act and anti-money laundering requirements while maintaining bank safety and soundness standards.

American competitiveness completes the framework, positioning the US as the premier global innovation destination. Bowman warned that failing to establish appropriate regulatory structures could jeopardize long-term American leadership in financial technology development.

Technology integration and supervision changes

Bowman announced the Fed’s “novel supervision” activities will be reintegrated into Reserve Bank examination staff, reestablishing normal supervisory processes for monitoring banks’ innovative activities.

She proposed allowing Federal Reserve staff to hold minimal digital assets to develop a working understanding of blockchain functionality, comparing the necessity to hands-on learning rather than theoretical knowledge.

[Editor’s Note: This is an abrupt U-turn from previous government approaches, notably those of former SEC Chair Gary Gensler. Gensler taught college-level blockchain courses at MIT yet never actually touched a blockchain with his own funds, having admitted to never holding any digital assets and, therefore, never executing his own transactions.]

The Fed recognizes tokenization potential for facilitating faster asset ownership transfers while reducing transaction costs and settlement risks. Bowman noted that banks of all sizes, including community institutions, can benefit from efficiency gains flowing from asset tokenization technology.

Furthermore, she highlighted that the GENIUS Act passage and presidential signature position stablecoins as integral components of the financial system, with implications for traditional payment rails.

Bowman called for industry engagement to help regulators understand blockchain’s capacity for solving additional problems beyond current use cases.

She specifically requested input on leveraging new technologies to combat fraud, identifying this as an exciting collaboration opportunity between the Fed and the digital asset sector.

The Fed Vice Chair concluded that innovation and regulation complement rather than oppose each other in creating more modern, efficient financial systems.

Mentioned in this article

Digital Asset and a consortium of major financial institutions have completed an on-chain U.S. Treasury repo transaction on the Canton Network, involving USDC as the cash leg and tokenized Treasuries as collateral.

The trade, executed on Tradeweb during the weekend, is being positioned as an industry first for enabling atomic settlement of both legs entirely on-chain within a public-permissioned institutional network.

Per the announcement, the Treasuries were custodied at the Depository Trust Company (DTC), a subsidiary of the Depository Trust & Clearing Corporation (DTCC), and then mirrored onto Canton for use as freely transferable collateral.

USDC was minted natively on Canton to support the transaction, enabling instant exchange and removing reliance on traditional banking hours or Fedwire settlement. The execution over a Saturday demonstrated the potential for continuous financing and collateral mobility outside legacy market windows.

Participants included Bank of America, Citadel Securities, Societe Generale, Virtu Financial, DTCC, Circle, Cumberland DRW, and Tradeweb, among others.

The firms described the trade as part of the Global Collateral Network initiative, which seeks to integrate high-quality liquid assets such as Treasuries into a unified, always-on market infrastructure that combines institutional compliance requirements with programmable settlement.

What makes this special?

While tokenized Treasuries are already issued on public blockchains such as Ethereum, Polygon, Arbitrum, XRP, Avalanche, and Stellar by multiple asset managers and fintechs, most existing implementations either settle one leg off-chain or operate without large-scale participation from major banks and central securities depositories.

In this case, both cash and collateral were tokenized and settled atomically on the same ledger within a framework designed for permissioned institutional use, integrated directly with established trading venues.

Tradeweb’s platform handled execution, with the transaction designed to preserve participant confidentiality while demonstrating technical feasibility.

According to the announcement, additional transactions using the same structure are planned later this year as part of broader testing of the network’s interoperability and privacy features.

The Canton Network describes itself as a public, interoperable blockchain with permissioned access for regulated entities, aiming to link separate applications and asset types into a single environment for cross-asset settlement.

The repo trade forms part of its roadmap to connect traditional financial infrastructure with on-chain settlement rails for round-the-clock market operations.