About Lesson
Due to cryptocurrency’s pseudonymous nature, criminals use it to launder illicit funds and commit tax evasion. The regulation of cryptocurrency improves its overall reputation and makes sure that appropriate taxes are collected. Improvements in AML benefit legitimate crypto users, although it does require extra effort and time investment by all parties.
According to Reuters, criminals laundered an estimated $1.3 billion (US dollars) of “dirty” money through crypto in 2020. Crypto is suited to money laundering for several reasons:
1. Transactions are irreversible. Once you’ve sent funds via the blockchain, they cannot be returned unless the new owner sends them back. The police and regulatory agencies cannot retrieve funds for you.
2. Cryptocurrency offers anonymity. Some coins like Monero prioritize the privacy of transactions. There are also “tumbler” services that layer crypto through different wallets to make its trail difficult to track.
3. Its regulation and taxation are still uncertain. Tax authorities globally still struggle to tax crypto efficiently, and criminals exploit this.