Unlawfully acquired stablecoin might sell at a discount or premium based on how it is being laundered.
Bitrace, a blockchain researcher, has established in an assessment of transactions with Tether that money laundering is, at times, a cause of the variation in stablecoin prices. Money laundering can be done at above- or below-market prices based on conditions.
Binance Spot Upward Utilization of Stablecoin in Money Laundering
Wu Blockchain published a translated report on December 26 showing that Bitrace highlighted two situations for utilizing stablecoin for money laundering.
Concerning the ‘upward’ scenario, bad actors sell a stablecoin to money launderers at a market price, and later, another can be rebought by the same actors at an increased cost.
The difference acts as payment for the services. According to the report, illicit USDT transactions might value the stablecoin at 8 to 10 Chinese yuan (RMB). At the time of writing, 7 Chinese yuan traded for $0.98.
Weak Anti-money Laundering to Blame for Allowing Illicit Finance
Concerning the ‘downward’ transactions, the stablecoin is utilized for legal purposes on other platforms without complete Anti-Money Laundering/ Know Your Customer (AML/KYC) initiatives. A number of proxy payment networks welcome USDT deposits and utilize fiat funds to aid users in making payments on other platforms.
This includes sorting out member funds for fund platforms, paying workers, recharging on online gambling networks, using e-commerce platforms to place orders, and offering presents on broadcasting platforms.
Due to the weak Anti-Money Laundering/ Know Your Customer authentication, ‘downward’ sellers of stablecoins are at smaller ‘reverse freezing’ risks. ‘Reverse freezing’ entails freezing accounts whose crypto is linked to a criminal case. In such situations, USDT might be sold at a 0.05 to 0.3 Chinese yuan discount.
Blockchain Analysis Traces Illicit Stablecoins in Leading Trading Networks
As a demonstration, the blockchain researcher monitored USDT frozen by the OKX platform and Tether. The illicit group spotted utilized ‘famous cryptocurrency trading networks such as Binance and FTX. Additionally, it identified OKX and moved the stablecoin to ‘more consolidated payment, trading and online gaming platforms.’
The report revealed that in the upward and downward settings, the criminal group utilizes stablecoin for its transactions and lacks exposure to fiat. In the U.S., Article 12 of the Uniform Commercial Code is presently being adopted by state legislatures.
It would be essential in safeguarding users’ claims to digital assets they embraced wholeheartedly. This also applies to situations where the assets were associated with criminal activities earlier.
Bitrace revealed that as part of its partnership with law enforcement, Tether has engaged the United States Federal Bureau of Investigation (FBI) on the platform. Initially, it unveiled the report on December 17.
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