Between September 2021 and March 2023, Tron network addresses flagged as potential AML violators received a total of more than $64.25 billion. These funds were transferred in stablecoins, which analysts believe caused some coins to be depegged.
An audit of addresses on the Tron network, conducted by Bitrace and published by Wu Blockchain, found that scammers laundered over $64.25 billion in stablecoins over a year and a half. Analysts also found that illegal activity with stablecoins is one of the reasons why they’re deppeged from the underlying asset.
Bitrace’s research showed that money laundering can have a significant impact on stablecoin prices, especially using Tether (USDT) transactions as an example. Analysts found two scenarios for using stablecoins for money laundering:
- “Upward U” scenario involves selling stablecoins at market price and then buying them back at an inflated value. Such transactions are conducted through low-risk addresses, allowing fraudsters to evade AML controls. The difference in asset price in such transactions is a payment for laundering services.
- “Downward U” scenario involves the use of stablecoins for perfectly legitimate transactions, but via platforms that have little protection against AML policy and KYC violations. Due to weak oversight on such platforms, stablecoin sellers can avoid “reverse freezing” of accounts.
Bitrace analysts noted that both scenarios are primarily used to avoid direct interaction with fiat money and bypass sanctions from centralized trading platforms and law enforcement agencies.
The latest PwC report showed that the number of countries that adopted a legal framework for stablecoins increased by 25% over the year.
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