Blockchain research firm Bitrace has conducted a study on the use of Tether (USDT) in money laundering activities, revealing how stablecoin prices can be manipulated in such illegal transactions. The findings of this study were published in a translated report by Wu Blockchain on Medium on December 26.
Bitrace’s investigation identified two primary methods in which stablecoins like USDT are used for money laundering:
Upward Transactions: In this scenario, criminals sell stablecoins to money launderers at the market price. They then repurchase another stablecoin from the launderers at an inflated price. The price difference between these transactions serves as the payment for the laundering services. The report noted that in illegal transactions, USDT might be priced at 8-10 Chinese yuan (RMB), compared to the standard rate of 7 RMB to 0.98 U.S. dollars.
Downward Transactions: Here, stablecoins are used for legitimate transactions on platforms with lax Anti-Money Laundering/Know Your Customer (AML/KYC) measures. These platforms may include online gambling sites, fund platforms, live broadcasting platforms, e-commerce platforms, and even for payroll purposes. Due to weaker AML/KYC checks, there’s a lower risk of accounts being frozen for receiving funds tied to criminal activities. In such cases, USDT might be sold at a discount, ranging from 0.05 to 0.3 RMB.
Bitrace also tracked USDT that had been frozen by Tether and the OKX platform, illustrating how a criminal group conducted transactions using major cryptocurrency trading platforms like FTX, Binance, and OKX, and then moved the stablecoin to more centralized trading and payment platforms, including online gambling sites.
The report highlighted that in both upward and downward scenarios, the criminal group conducted all transactions in stablecoins, avoiding exposure to fiat currencies.
In the context of the United States, the adoption of Article 12 of the Uniform Commercial Code by state legislatures is significant. This legislation aims to protect users who accept digital assets in good faith, even if those assets were previously linked to criminal activities.
Furthermore, Bitrace noted that Tether has collaborated with law enforcement agencies, including the U.S. Federal Bureau of Investigation, to monitor and address illegal activities on its platform. The original report by Bitrace was released on December 17.
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