Privacy wallets are becoming popular amongst criminals as they use them to launder Bitcoin and other cryptocurrencies
Elliptic’s research revealed that the use of privacy wallets to launder the proceeds of crime in Bitcoin is now 13%. This is a massive increase from the 2% recorded a year earlier and creates a concern within the cryptocurrency space.
Elliptic, in its new guide titled “Financial Crime Typologies in Cryptoassets” looked into over 35 financial crime typologies that involved the use of Bitcoin (BTC) and other cryptocurrencies. The chart displayed by Elliptic showed that this year, around 13% of all proceeds of crime in BTC were laundered via privacy wallets.
This represents an 11% jump in the use of privacy wallets over the past year as 2019 only saw 2% use of the same method. To convert the percentages into figures, more than $160 million in bitcoin from darknet markets, thefts and scams have been laundered through privacy wallets in 2020.
Elliptic’s research also looked at some of the high-profile cybercrime activity this year where the hackers used privacy wallets to launder the stolen funds. The first such hack was Twitter, where the hackers took control of over 130 high-profile accounts on the platform. The hackers went on to promote the Bitcoin scam and raised over $120,000 in cryptos. They subsequently laundered the funds via a privacy wallet called Wasabi wallet.
Another hack involving privacy wallets took place in September, where the hackers stole more than $280 million in cryptocurrencies from KuCoin. Wasabi Wallet was also used to help the hackers launder the stolen Bitcoin from the platform.
Although privacy wallets have been developed to help people achieve financial privacy in a world that is becoming less private every day, criminals are taking advantage of the feature to launder funds and carry out other financial crimes.
The use of privacy wallets to launder funds via cryptocurrencies poses a challenge to law enforcement, regulators and compliance professionals as it makes it harder for them to fight financial crimes in the cryptocurrency sector.
The solution to this menace could be blockchain analytics tools. They provide valuable information that compliance professionals at crypto exchanges and financial institutions can use to track a customer’s funds source. Implementing such measures could reduce the use of privacy wallets for laundering cyber-theft funds.
Services like PrivacySavvy can give peace of mind to crypto traders as the platform works to protect users’ privacy online to protect against hackers and phishing attacks