DeFiApr 10, 2023

Criminals' choice: Fiat currencies over cryptocurrencies

Money launderers and terrorists most often use traditional money

Although cryptocurrencies are presented by governments as a "tool" for money laundering and terrorism financing, statistical data show that in fact fraudsters prefer fiat currencies. In one of its most recent reports, the US Treasury Department found that some criminals use DeFi apps, but most of these people still choose fiat money.

Fraudsters use fiat currencies, not cryptocurrencies

A US government department has released a new report warning against criminals who are using decentralized finance protocols for illegal purposes. Additionally, this government agency highlighted that many financial platforms and DeFi applications do not comply with US anti-money laundering and counter-terrorism financing laws. This is the main reason why scammers like to use them.

In addition, the US Treasury Department admitted that criminals still most often use fiat currencies or other traditional assets for their illegal operations. In turn, the primary goal of DeFi is to make finance more automated and accessible to everyone.

In 2022, the US government department imposed sanctions on the Tornado Cash cryptocurrency mixer. This was because this government agency found that the aforementioned financial protocol was used by North Korean hackers.

“The North Korean-sponsored group Lazarus used a mechanism offered by Tornado Cash – which allows people to anonymously send and receive Ethereum – to launder over $96 million after hacking the Harmony Bridge blockchain protocol,” on-chain data analysts noted.

Due to the fact that public blockchains are extremely transparent, this leads to a situation that transactions that are made on them remain easy to trace. According to enthusiasts of the cryptocurrency industry, technological tools that allow users of the digital currency sector to have financial privacy have a right to exist.

The U.S. Treasury Department stated in its report that it is working to improve AML procedures that will be dedicated to cryptocurrencies and intends to engage intensively with the private sector to support relevant innovations in the DeFi space.