Cash, not crypto remains criminal’s preferred tool for illicit finance, study says

A new study finds that blockchain offers greater transparency and traceability as it remains the dominant tool for illicit finance, despite widespread misconceptions.

Despite the widespread perception that cryptocurrencies dominate illicit transactions, cash remains the tool of choice for criminals engaging in illicit finance, according to a new study by Crypto ISAC. While blockchain transactions create an immutable record, making crypto more traceable, cash transactions leave no digital footprint, complicating efforts to track illegal activity.

“The extent of money laundering and terrorist financing through traditional banking channels, as reported by regulatory agencies and law enforcement, dwarfs the volume of similar activity observed in the cryptocurrency space.”

Crypto ISAC

While cryptocurrencies have been linked to crime in high-profile cases, including stock market crashes and thefts, they account for a small portion of total crypto volume. Crypto ISAC states that although it is impossible to track the exact amount of illicit activity in traditional finance, the estimated amount of money laundered globally in a year is 2-5% of global GDP, or between $800 billion and $2 trillion.

Illegal share of all crypto trading volume | Source: Crypto ISAC

Meanwhile, blockchain analysis firm Chainalysis reported that only 0.34% of on-chain transaction volume in 2023 is linked to illegal activities.

Crypto ISAC noted that law enforcement agencies are increasingly using the transparency of blockchain to track illegal activity, positioning regulated crypto platforms as allies in the fight against crime. At the same time, when criminals use traditional financial systems, there are no public sources from which law enforcement can easily track funds, making it difficult for law enforcement to track criminals.

“This creates a higher burden of proof and requires the appointment of the U.S. Attorney and the jury to hear and issue the subpoena. Only then can law enforcement begin to piece together a judicial trail of the funds in question.”

Crypto ISAC

The US Treasury has previously echoed these findings, stating that cash remains the go-to method for money laundering due to its anonymity, stability and ubiquity. Bulk cash smuggling, which mostly involves moving U.S. dollar bills across borders and depositing them into foreign accounts, remains a common method for laundering illicit proceeds, according to February reports from the Treasury.