Booming crypto market a potential haven for money laundering – BNN

The booming world of decentralized finance, which has collected more than US$11 billion in cryptocurrencies in a matter of months, is a potential haven for money laundering, according to new research.

Globally, 56 per cent of digital currency services have weak or porous “know your customer” controls, blockchain security firm CipherTrace said Thursday in a report. KYC procedures are meant to confirm the identity of users to prevent laundering. Dave Jevans, chief executive officer of CipherTrace, said regulators will be looking more closely at decentralized finance because of its astounding growth.

“The last six to eight weeks have shown it to take off unbelievably,” Jevans said in an interview. “Regulators are taking note when US$1 billion flows into something a week after it started.”

Defi projects are blockchain applications that connect users in a peer-to-peer fashion with no centralized authority that can stop or monitor transactions. In early July there was a bit over US$2 billion of crypto locked into defi projects, according to data compiled by Defi Pulse. That’s since grown to US$11 billion.

Many new defi applications allow users to earn interest on crypto loans they make or to use one digital currency to get a loan in another coin. They should fall under the jurisdiction of the Securities and Exchange Commission because many coins are securities, Jevans said. And money-service business rules should apply, he said.

“They’re not going to be able to escape from regulation for long,” Jevans said. “The eyes are upon them.”

CipherTrace analyzed more than 800 virtual-asset service
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