Blockchain researcher Bitrace recently released a report, translated by Wu Blockchain, shedding light on potential money laundering activities involving stablecoins, particularly Tether (USDT). Published on December 26, the report outlined two scenarios in which stablecoins were exploited for illicit purposes.
In the “upward” case, bad actors sell stablecoins to money launderers at market prices. The launderers then repurchase another stablecoin at an inflated price, with the price difference serving as payment for money laundering services. The report indicated that illegal USDT transactions could be priced at 8-10 Chinese yuan (RMB), resulting in profits for money launderers.
The “downward” case involves the use of stablecoins for legitimate purposes on platforms lacking robust Anti-Money Laundering/Know Your Customer (AML/KYC) measures. Proxy payment platforms, accepting USDT deposits and using fiat funds for various payments, are exploited for activities such as online gambling, fund settlements, live broadcasting gifts, e-commerce orders, and employee salaries.
Due to weak AML/KYC verification on these platforms, stablecoin sellers in these transactions face lower risks of “reverse freezing,” which involves freezing accounts tied to criminal cases. USDT may be sold at a discount of 0.05 to 0.3 RMB in such cases.
Bitrace’s report emphasized the tracking of frozen USDT by Tether and the OKX platform. A criminal group identified in the report used cryptocurrency trading platforms like FTX, Binance, and OKX to transfer stablecoins to centralized trading platforms, payment platforms, and online gambling platforms.
The report highlighted that the criminal group exclusively conducted transactions with stablecoins, remaining detached from fiat currencies throughout both scenarios.
While Tether has collaborated with law enforcement agencies and recently onboarded the U.S. Federal Bureau of Investigation, it is worth noting that the company had been hesitant to freeze wallets associated with the sanctioned protocol, Tornado Cash. Tether claimed no requests from U.S. law enforcement prompted this action.
Tether’s strategic decision to freeze wallets aligns with its commitment to maintaining high standards of safety within its global ecosystem and strengthening its relationship with global law enforcement and regulators.
