The UN is concerned about the high popularity of cryptocurrencies among criminals. Why?
Despite the various benefits and the many supporters, cryptocurrencies also have their haters. Those often claim that criminals use Bitcoin and altcoins in illegal activities like drug trafficking, money laundering, terrorist financing and more. And there’s some truth in that: in a recent report, analysts at the UN Office on Drugs and Crime noted that digital assets have become an attractive financial tool for some Mexican and Colombian cartels. We tell you more about what’s going on.
It should be noted that the topic of illegal use of cryptocurrencies has been quite popular lately. The reason for this is the fresh sanctions for the Russian Federation. With this in mind, many in the blockchain community have suggested that the authorities could use crypto to circumvent international restrictions. However, many experts, including the head of the FBI, disagreed.
Who actually uses crypto?
The agency explained exactly how these gangs are using cryptocurrency in their activities. According to CryptoPotato’s sources, drug proceeds are first broken down into small payments to avoid financial control by the state. Cartels then buy small amounts of Bitcoin with them, “hiding the origin of the money”. In addition, BTC allows them to pay off their associates around the world.
Among the criminal organisations mentioned are cartels called Jalisco New Generation and Sinaloa. The latter is one of the largest drug trafficking gangs in the world. For decades it has been led by the infamous Joaquin “El Chapo” Guzman, who is currently serving a life sentence in a US federal prison.
Drug lord Joaquin Guzmán
Mexican and Colombian organised crime groups “are increasingly using virtual currency because of the anonymity and speed of transactions,” according to experts. However, it is worth noting that Bitcoin’s blockchain is completely transparent, with all transactions accessible to anyone. As such, the surveillance of cartels’ financial transfers is well within the reach of government organisations.
That being said, the nature of BTC makes the cryptocurrency a highly questionable tool for those trying to facilitate illegal financial transactions. On the other hand, cash is still the most commonly used method of payment in illegal transactions.
It should be noted that cryptocurrencies are sometimes targeted by regular addicts. For example, in February 2022, a story broke in Maryland, where a local resident drugged his father with a strong sleeping pill. He was targeted with the equivalent of $400,000 in digital assets, and the victim's situation was critical. Read more about the story in a separate article.
In addition to global crime, the attention of the world is now riveted on the geopolitical conflict between Russia and Ukraine. Due to the unprecedented number of sanctions from Western countries, analytics platform Chainalysis has introduced two new tools that companies can use to make sure they are not interacting with entities or individuals on sanctions lists in the cryptosphere.
The first of these tools is a blockchain oracle, which is a platform that compares data in blockchain with the real world. This smart contract will store data from sanctions lists provided by various US, EU and UN authorities. The oracle can easily be invoked by other smart contracts to verify any cryptocurrency wallet before interacting with it.
Instructions on how to use Chainalysis’s blockchain oracle
The second tool is an API interface for web and mobile user interfaces. It is also designed to comprehensively check cryptocurrencies for sanctions. Chainalysis has made clear its support for Ukraine in the recent conflict. As such, the company’s new tools are free to use.
In this case, we believe that using crypto is not much different from interacting with fiat. The only difference is the ability to make international payments using digital assets. However, because coins leave a perpetual trail on the blockchain, they are unlikely to remain popular with criminals. In addition, there is the possibility that many of them are not yet familiar with the specifics of coins and the blockchain at their core.
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