Since 2022, so-called stablecoins have facilitated a significant increase in crypto crime, to the tune of a shocking $40 billion. These coins, designed as stable cryptocurrencies, were supposed to offer security and reliability, but are proving to be an ambiguous instrument in the digital financial world.
• Popularity of stablecoins has grown
• Criminals benefit from the stability of stablecoins
• The majority of illegal transactions involve evading sanctions
Stable currencies for illegal purposes
Stablecoins are digital currencies whose value stability is tied to traditional fiat currencies such as the US dollar or the euro, as Finanztip reports. This approach should therefore serve to minimize the volatility that is often associated with cryptocurrencies such as Bitcoin and Ethereum. As a supposedly safe investment option, stablecoins quickly gained popularity and became a cornerstone in the crypto ecosystem.
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Despite their original intention, stablecoins have revealed a darker side. Since 2022, they have been increasingly used by criminals to launder funds, finance fraudulent activities and facilitate digital attacks, according to a publication by Chainalysis, a cryptocurrency analysis company. The supposed stability of the coins has become a lure for shady dealings as criminals try to exploit the security gaps and regulatory gray areas through crypto asset transactions.
Cryptocrime on the rise
Chainalysis released a new report that found stablecoins like Tether, which are pegged to the value of the US dollar, were used in the vast majority of fraudulent crypto transactions and sanctions violations in 2023. The analysis found that stablecoins were involved in 70 percent of crypto fraud cases and 83 percent of crypto payments to sanctioned countries such as Iran and Russia.
The increase in crypto-crime caused by stablecoins has greatly affected the overall balance of the digital finance world, according to the Chainanalysis report. From fraudulent ICOs (Initial Coin Offerings) to Ponzi schemes to ransomware payments – the range of crimes is diverse. The total of $40 billion enabled by crypto crime since 2022 illustrates the scale of the challenges facing the crypto industry.
Sanctions evasion as the main cause
Andrew Fierman, head of sanctions strategy at Chainalysis, explains that stablecoins are particularly attractive to sanctioned individuals and countries. They therefore make it possible to take advantage of the stability of the US dollar and avoid sanctions. This development is particularly evident in crypto exchanges in sanctioned countries such as Iran and Russia, where stablecoins far exceed Bitcoin.
Chainalysis data shows that the largest category of crime enabled by stablecoins is sanctions evasion. This accounts for more than half of the $24.2 billion in crime transactions Chainalysis observed in 2023, with stablecoins accounting for the majority of these transactions.
Editorial team finanzen.net