Regulating Cryptocurrency in India:
A global investigation, titled The Coin Laundry, conducted by the International Consortium of Investigative Journalists (ICIJ), has uncovered how cryptocurrency exchanges have become a new hotspot for global money laundering.
- Cryptocurrencies are borderless, pseudonymous, and fast, offering limited traceability in the absence of strict KYC norms.
- Crypto “mixers” and “wallet hops” obscure ownership trails, making them ideal for laundering illicit proceeds.
- They may also use mule or pooled accounts to deposit cash and buy crypto like Bitcoin, taking advantage of the system’s pseudo-anonymity.
- In this stage, criminals hide the origin of funds by using multiple exchanges, privacy coins, KYC-free Decentralised Exchanges (DEXs), and chain-hopping ( moving cryptocurrency across multiple blockchains in quick succession).
- These tactics break the audit trail, making transactions very hard to trace.
- Actors involved include ransomware groups, drug syndicates, cyber fraud rings, and sanction evaders.
- In the final stage, the “cleaned” funds are converted back into fiat currency and moved into the legitimate economy.
- The criminal sells the obscured crypto on a laxly regulated foreign exchange and withdraws the fiat to a bank account, posing it as legitimate investment returns.
