Crypto Exchanges were the biggest recipients of illicit Bitcoin (BTC) in 2019
A total of 300,000 individual accounts at Binance & Huobi received Bitcoin from criminal sources in 2019. The chart above (Figure 3, right) breaks up the information in buckets based on the total value of all Bitcoin they’ve received last year. The three colored bars stand for the following — green represents the number of unique accounts, yellow stands for the total amount of cryptocurrency received collectively by all the accounts in each bucket & red segment denominates the amount of illicit Bitcoin received by all accounts in each bucket.
As per the report, 31 accounts in the highest-earning bucket ($100 million-$1 billion) on the right-hand side have collectively received just over $8 billion worth of Bitcoin in 2019. It is pretty clear that a very small percentage of these accounts is the most active. The three highest-receiving buckets totaling 2,196 accounts received a total of nearly $27.8 billion worth of Bitcoin in 2019.
Having said that Bitcoin from criminal sources represents a small percentage of the total cryptocurrency amount received by both the exchanges. Another version of the chart (Figure 3, left) is identical in terms of the illicit funds going to a few ‘whale accounts’ in the three highest receiving buckets. Over $819 million in Bitcoin from criminal sources, representing 75% of the total were residing in the 810 highest-receiving buckets.
What is the share of Rogue 100 OTC in the illicit trade?
So who are these whales driving the illicit activity? Chainalysis deduces that these may be OTC (over the counter) brokers. These OTC brokers, who are typically associated with an exchange but operate independently facilitate between individual buyers and sellers — these brokers are a crucial source of liquidity in the crypto market. Lack of liquidity can cause massive volatility, that we so often see in the Crypto market.
While it’s next to impossible to know the exact size of the OTC market, Cryptocurrency data provider Kaiko estimates that the majority of the cryptocurrency trade volume from OTC trading. The problem, however, arises from the fact that some of these OTC brokers are involved in money laundering for criminals.
Chainalysis put together a list of 100 major OTC brokers called the “Rogue 100,” which they believe are providing these illicit services to criminals — 70 of the OTC brokers in the Rogue 100 are in the group of Huobi accounts receiving Bitcoin from illicit sources. Surprisingly though, none of these 70 rogue accounts operate on Binance.
Chainalysis also expects this Rogue 100 list might not be final since this was manually put together on investigations based on behalf of their clients. They expect that other highly-active Binance and Huobi illicit accounts might be taking laundered money from other OTC brokers that have yet to be identified. As per the chart (Figure 4), illicit bitcoin received by Rogue 100 has dropped off somewhat after peaking in Sep. 2019, it has been clearly an upward trajectory for such funds in the past two years.
The report has provided some interesting insights into how much money is being laundered using bitcoin, where is it coming from & where is it headed which could lead to eventually tackling the problem effectively.
Published at Fri, 17 Jan 2020 22:24:08 +0000
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