A study by the UK's Henry Jackson Society reveals a shift in criminal activity to digital assets. Cryptocurrency has become a key tool for criminals to launder money and finance hostile governments.
The publication, “Confronting the Illicit Finance Hydra in Crypto Markets: Protecting Retail Investors and Disrupting Hostile Government Exploitation,” found criminal groups laundered about $350 billion using crypto over two decades.
Criminals Shift to Crypto
Cryptocurrencies enable criminals to move illegal finances undetected. The report’s database of 164 cases over 20 years reveals the rapid growth of this issue. These funds fuel corruption and empower hostile regimes that harm ordinary people.
With stablecoins designed to evade sanctions, state-backed hacking groups have leveraged crypto exchanges operating in lawless regions to contribute to the crisis. Criminals have gone as far as launching new coins created to evade international sanctions, but they have never been brought to book.
“Historically, Bitcoin (BTC) was the primary currency used for illicit transactions, reflecting its early adoption and dominance in cryptocurrency markets. However, stablecoins are now increasingly preferred, largely due to their reduced price volatility and the availability of off-ramps that, in some cases, operate under weaker oversight and compliance regimes,” the report stated.
Law Enforcement Response Too Weak
Notably, this issue spans the globe from Asia and the Middle East to Europe and the U.S. However, it is heavily concentrated in regions such as North Korea, Russia, and Iran. The report identified the U.S., UK, and Russia as the dominant points of origin. Roughly half of the illicit crypto exchanges are based in Russia, while the majority of ransomware groups are based in Iran and North Korea.
North Korea reportedly earns a third of its government revenue from illicit crypto. These operations have weakened global security.
Despite the growing threat, the Henry Jackson Society insists that the response from global authorities has been weak. The number of cryptocurrencies seized by U.S. law enforcement agencies has plummeted sharply by 95% in five years.
Additionally, only 21% of crypto-linked money laundering cases have resulted in convictions. Authorities have recovered only 27% of illegal assets, and a third of the cases have never faced legal action.
Hence, the publication calls for specialist enforcement teams and systems to tackle the issue and help prevent further abuse.
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