Change in Criminal Payment Preferences
Chainalysis research reveals a significant shift in how criminals manage their illicit funds. According to their latest findings, stablecoins have overtaken Bitcoin as the preferred digital currency for money laundering operations. The crypto analytics firm found that these fiat tokens were involved in almost 63% of all money laundering transactions in 2024.
I think what’s happening here is that criminals adapt to what suits them best. The report explains that stablecoins are generally preferred because they are relatively easy to send abroad. They can also be traded informally without the usual identity verification processes that traditional financial systems require. It appears that stablecoins are becoming the new “back accounts” of criminal organizations.
How the Money Laundering Process Works
For those unfamiliar with the terminology, a “back account” serves as the final destination where funds transferred through multiple accounts are ultimately withdrawn. The initial account that victims first deposit their money into is called the “initial account”. This tiered approach makes tracking more difficult.
Until 2021, Bitcoin was almost exclusively used for various money laundering crimes. But things have changed recently. Stablecoins have become more difficult to trace, particularly when crossing international borders. The growth in the adoption of stablecoins has unfortunately led to a corresponding increase in their illegal use.
This trend isn’t just something Chainalysis has noticed. The Financial Action Task Force reported in June that the criminal use of stablecoins had increased significantly since last year. They also claimed that the majority of illicit activity on blockchains now involves stablecoins.
Global criminal patterns
The United Nations Office on Drugs and Crime released a report in January identifying Tether (USDT) as the most popular currency for criminal gangs operating in Southeast Asia. The main reason? Versatility. The UNODC has highlighted the difficulty of smuggling traditional fiat currencies abroad, and converting them in countries like Korea presents even more challenges.
Chainalysis found that converting proceeds of crime into stablecoins allows for relatively easy cross-border fund transfers. Money launderers can bypass regulated exchanges by using foreign crypto platforms that do not require KYC verification. They can also use over-the-counter transactions, which adds another level of anonymity.
The tracking challenge
The report raises an interesting point about traceability. Although stablecoins are fundamentally traceable on the blockchain, their decentralized nature allows them to avoid direct government control. Although transactions leave a digital trail, crypto wallets make tracking difficult because they use random alphanumeric characters. When stablecoins go through mixing or tumbling services, they become even more difficult to track.
Korean criminals in particular are increasingly turning to stablecoins for so-called “Oda Jangip fraud.” This scam usually begins with false advertisements on online shopping stores or second-hand markets, where unsuspecting buyers are lured into sending money.
What is concerning is that stablecoins are being used to launder the proceeds of both small-scale frauds involving hundreds of thousands of dollars and large-scale operations transferring hundreds of millions or more.
Legal consequences and sentencing patterns
Perhaps the most troubling finding is that criminals involved in stablecoin-related crimes often receive surprisingly lenient sentences. Chainalysis provided the example of a criminal who laundered more than $188 million while working for a voice phishing ring in January. This person, called Person A, purchased Ethereum and transferred it to an overseas crypto exchange.
The ETH was then exchanged for USDT and transferred to a crypto wallet controlled by the criminal network. The entire money laundering process involved domestic bank accounts, ETH, overseas crypto exchanges, stablecoins, and finally a crypto wallet. Despite the scale of the operation, the criminal only received one year and six months in prison, suspended for three years.
Another case involved a felon sentenced to eight months in prison and two years of probation for cheating a victim who was buying perfume at a second-hand market. The criminal received the customer’s 220,000 won deposit via a fake bank account and then exchanged it for USDT to cash out.
Financial fraud organizations using stablecoins primarily employ tactics such as voice phishing, stock and coin scams, and second-hand market fraud. Their main goal is to find ways to cleanly launder the products and ultimately cash them out. It’s a system that seems to be working for them, at least for now.
