Crypto Laundering Is Moving Away From Centralized Exchanges, Chainalysis Says

• On-chain money laundering reached $82 billion last year, as criminals pivoted away from CEXs.
• Chinese-language networks now process roughly 20% of all laundered crypto funds.
• Telegram-based “laundering-as-a-service” businesses have replaced centralised exchanges for many of these syndicates.

Bad actors in the crypto space are now changing their tactics as regulators tighten the rules around the crypto industry.

For years, criminals relied on major trading platforms to clean their stolen funds. However, recent data shows that this trend is reversing. 

The worldwide on-chain money laundering system grew to $82 billion last year alone, and this rise came as professional service providers took the lead.

The Rise Of On-Chain Money Laundering

Centralized exchanges have beefed up their security and customer checks recently. 

These platforms can now freeze any suspicious funds easily, and this increased pressure forced criminals to rethink how they launder crypto.

Now that CEXs are no longer in the picture, professional networks have stepped in to fill the gap. They now offer a variety of special services that are harder for authorities to track.

According to the report from Chainalysis, the modern criminal no longer acts alone. 

Instead, they use highly organised “laundering-as-a-service” firms to clean their money. These networks emerged at the start of the pandemic between 2019 and 2020, and have grown since. 

In fact, inflows to these specific networks grew 7,325 times faster than flows to centralised exchanges since 2020. This growth shows the massive liquidity that is now available in the crypto market.

Chinese-language networks currently dominate this new era of financial crime and handle about $16.1 billion annually. That is equal to roughly $44 million moving through their systems every single day. 

These groups do not just serve one type of criminal, and they support everything from romance scams and drug trafficking to North Korean hacking proceeds.

How These Networks Avoid Detection

These organisations work very efficiently according to Chainalysis. They often use Telegram to advertise their services and avoid the eyes of financial regulators. 

They use tactics like Money Mule motorcades, where they recruit thousands of individuals to receive and move funds. These “mules” use bank accounts or cards to layer transactions and hide their origins, explaining how so much money moves so fast.

They also use Black U services, which are vendors that sell “tainted” crypto at a massive discount. This allows them to offload stolen assets quickly to buyers who are willing to take the risk.

Finally, they use Running Point Brokers, who serve as the initial entry channel for illegaltransfers. These serve as the gateway between the crime itself and the blockchain.

Chainalysis noted that the speed of these services is frightening because large transactions can sometimes be cleared in under two minutes. This makes it very difficult for law enforcement to intervene before the money disappears. 

Capital Controls and Underground Banking

Many of these networks thrive because of strict currency rules in Mainland China. 

Wealthy individuals often look for ways to bypass capital controls to move money abroad. These individuals are the ones who provide the liquidity pools that criminals need. 

In other words, the whole thing is a collaboration between people trying to hide wealth and those trying to clean stolen cash.

Traditional underground banking has now fully merged with the blockchain, and instead of physical cash couriers, these groups now use stablecoins like USDT. 

Chainalysis noted that stablecoins now account for 84% of all illegal transaction volume because they are easier to transfer across borders and have lower volatility than other coins. 

This makes them the perfect tool for moving billions of dollars in plain sight.

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