In January 2023, Anatoly Legkodymov, founder of the Hong Kong-registered cryptocurrency exchange Bitzlato Ltd, was arrested by US authorities in Miami. The US Department of Justice charged Anatoly with running his enterprise as a money-laundering outfit that processed approximately $700 million in illicit funds. His exchange served as a haven for criminal networks, as it required minimal KYC checks and lax security protocols for the illicit transmission of digital currencies.
One of his most prominent clients was the Russian origin Hydra, notorious for operating the world’s largest darknet marketplace peddling drugs and illegal goods. This bastion of crime was dismantled in April 2022 by the German Federal Criminal Police in coordination with US law enforcement.
Juxtaposing Anatoly Legkodymov’s arraignment, a significant development occurred in October 2025: President Donald Trump pardoned Changpeng Zhao, the Binance founder and Chinese crypto billionaire. Zao had pleaded guilty to complicity in violating U.S. money laundering laws after his platform was used to finance terrorist groups such as Al-Qaeda, Hamas’ Al Qassam Brigades, Palestinian Islamic Jihad, and ISIS.
The presidential clemency granted to Zao has attracted scrutiny from political analysts and lawmakers, who associate the pardon with Binance’s promotion of the Stablecoin, USD1. USD1 is a cryptocurrency developed by the Trump family’s crypto venture, World Liberty Financial. The $2 billion investment deal, involving Binance and Abu Dhabi’s state-owned investment firm, MGX, was settled using USD1, substantially leveraging its brand value, visibility and adoption. Soon after receiving the presidential pardon after serving a four-month sentence, the convicted felon Changpeng Zhao wrote on social media, “deeply grateful for today’s pardon and to President Trump for upholding America’s commitment to fairness, innovation and justice.”
Cryptocurrencies – also referred to as digital currency, crypto-token, virtual commodity, virtual asset, or cyber currency – were initially celebrated as a revolutionary advancement in monetary transmission. Their introduction disintermediated financial transactions from central regulatory bodies such as central banks, facilitated cost-effective cross-border payments, leveraged blockchain-based distributed ledgers for transparency and cryptographic keys for tamper-proof security. These innovations were also envisioned as breakthrough technology to promote financial inclusion for the millions of unbanked and underbanked populations.
Although millions of cryptocurrencies exist in 2025, the number of actively traded cryptocurrencies is around 10,000. Bitcoin, Ethereum, Dogecoin, and Solana are among the most popular currencies. The global cryptocurrency market capitalisation is estimated to exceed $3 trillion. In the United States, crypto adoption is steadily growing, with 28 per cent of adults, or 65 million, currently owning crypto assets.
Despite these transformative benefits, technologically savvy criminals and organised enterprises have managed to bypass the safeguards and reliability built into the blockchain-based cryptocurrency transactions. The alarming consequence is that cryptocurrencies have become sordid tools for facilitating both online and offline fraud. The potential to obfuscate the origins and financial trail of transactions on online cryptocurrency platforms and at physical touchpoints such as crypto ATMs has rendered them potent instruments for criminal enterprises seeking to conceal their ill-got wealth and evade regulatory oversight.
Although only about 23 per cent of cryptocurrency activity is linked to crime, growing global adoption could increase risks. To illustrate the scale of legitimate cryptocurrency use, more than 15,000 businesses worldwide now accept Bitcoin as an official method of commercial transactions and payments. This level of mainstream commercial integration demonstrates not only the growing influence of cryptocurrencies in the global financial system but also highlights the urgency of addressing the risks associated with criminal liaisons as adoption scales exponentially.
Money laundering dominates cryptocurrency crimes, far surpassing other illegal activities such as terror financing, corruption, trade in illicit goods on the dark web, bribery, embezzlement, evasion of financial sanctions, ransomware, and phishing scams. In 2023 alone, an estimated $22.2 billion was laundered through cryptocurrencies. In the crypto world, money laundering typically adheres to a three-stage process: placement, layering, and integration.
The first step in placement is essentially introducing crime money into the crypto system by creating accounts. When the sum is too large to avoid surveillance by financial and legal regulators, criminals use a method called “smurfing”, in which they break large amounts into many small parts by creating multiple accounts and deposits, since cryptocurrencies are anonymous at the point of creation. The intermediary stages of layering can take myriad forms. The prevalent one is an obfuscation service called a “mixer” that blends crypto assets from countless users to conceal the origin and ownership of illicit funds. It is akin to jumbling words or whisking eggs to make an omelette.
Another layering technique is known as “cross-chain bridges,” which facilitate the transfer of crypto tokens between different blockchain networks, creating a labyrinthine mesh of transactions that obscures the paper trail. The use of “privacy coins” such as Monero and Zcash is another method that leverages advanced cryptographic techniques to mask transaction details. Entities that offer mixing and layering services typically charge a fee between 1 per cent and 3 per cent of the laundered value. The final phase involves integrating these largely unidentifiable and untraceable tokens back into the mainstream financial economy through crypto exchanges and ATMs, where cryptocurrencies can be converted into fiat currency.
A notable example is Bitcoin Fog, which was the world’s longest-running crypto laundering service. Over a decade of illegal operations from 2011 to 2021, Bitcoin Fog reportedly processed $400 million in transactions, successfully ‘cleaning’ 1.2 million tokens of digital ‘dirty’ money. In 2024, its Russian Swedish founder, Roman Sterlingov, was convicted by a US court for providing “mixer” services for narcotic dealers and facilitating the trafficking of child sexual abuse material.
These activities are commonly known in the cryptocurrency universe as “On-ramp” and “Off-ramp” operations. An “on-ramp” refers to the process by which traditional fiat currency—such as U.S. dollars or euros—is converted into cryptocurrency. This initial step introduces funds into the digital asset system, allowing individuals to acquire crypto tokens and participate in the broader cryptocurrency market.
Conversely, an “off-ramp” refers to the process of converting cryptocurrency holdings back into fiat currency. Through this mechanism, individuals can withdraw or realise the value of their digital assets, effectively exiting the crypto market and re-entering the traditional financial system. The distinction between on-ramp and off-ramp operations is crucial, as these transitions represent the primary points of interaction between conventional banking infrastructure and decentralised digital assets.
Criminals have used the pseudonymity of cryptocurrencies to conceal illicit profits from regulators. Leveraging their expertise in banking, fintech, and programming, they create phishing and malware scams, maintain multiple accounts, and use social engineering tactics to steal crypto assets from exchanges.
In 2025, North Korean hackers orchestrated a series of audacious cyberattacks on cryptocurrency exchanges, resulting in the theft of more than $2 billion. The most sensational incident was the unprecedented heist of $1.5 billion in Ethereum (ETH) from the Bybit exchange, the largest single theft in the history of cryptocurrencies.
These cybercriminals operate collectively under the name “Lazarus Group.” This organisation is widely believed to be composed of intelligence units operating within the 3rd Bureau of the Reconnaissance General Bureau (RGB), North Korea’s principal foreign intelligence agency. The Lazarus Group’s activities go far beyond financial gain; they are alleged to play a critical role in advancing the nation’s strategic interests.
The funds acquired through these cyberattacks are purportedly used to support North Korea’s repressive government apparatus. Additionally, these stolen assets enable the regime to circumvent international sanctions, providing a financial lifeline that sustains the country’s weapons of mass destruction and ballistic missile programs.
In May 2021, a group of hackers known as Darkside launched a massive ransomware attack on Colonial Pipeline, the largest refined oil products pipeline in the United States. They gained access to the company’s security network via a compromised VPN that lacked multifactor authentication. It cost the company $4.4 million in ransom payments, prompting the Biden administration to declare a national emergency.
Corruption and bribery have emerged as significant channels through which cryptocurrencies are exploited to launder unlawfully obtained funds and exert undue influence over policymakers. A pertinent case highlighting this trend occurred in 2022, when two Chinese intelligence officers were charged for their involvement in obstructing a United States federal investigation related to a major espionage operation. Their actions were aimed at interfering with ongoing legal proceedings against Huawei, the behemoth Chinese telecommunications company under scrutiny for alleged espionage.
According to federal authorities, the intelligence officers attempted to bribe a U.S. government employee to obtain sensitive documents connected to the prosecution of Huawei. The bribe, amounting to $61,000, was explicitly intended to be paid in cryptocurrencies. By offering digital currency, the officers sought to facilitate the illicit transaction while obscuring the financial trail, thus making it more difficult for investigators to detect or trace the payment. This use of cryptocurrency highlighted its growing appeal for covert financial dealings, especially in cases involving efforts to silence witnesses or compromise legal processes.
The crash of the FTX exchange, run by the disgraced CEO Sam Bankman-Fried, bears witness to the prospect of embezzlement of crypto funds costing customers an estimated $8 billion. He was convicted of misappropriating customer deposits, channelling them to fund his lavish lifestyle, and roping in celebrities and politicians through donations and endorsement deals to promote FTX. But lurking behind his flamboyance and engineered legitimacy was the criminal intent to defraud customers in the mode of classic old-school embezzlement.
Crypto mining is another prospective avenue that criminal organisations have identified and are deploying their illicit profits to masquerade as their source of wealth. Crypto mining enables these offenders to receive newly minted “clean” coins, sanitised of any criminal history. In 2025, Operation Serengeti 2.0, the sweeping INTERPOL-led law enforcement mission, had busted 25 crypto-mining centres in Angola, where 60 Chinese nationals were illegally validating blockchain transactions to generate cryptocurrency. Chinese money launderers are also in the forefront, assisting drug cartels in Latin America and Mexico to facilitate the movement of criminal proceeds of their US and global contraband sales using cryptocurrencies. Chinese suppliers of precursor chemicals – critical ingredients in the production of fentanyl and methamphetamine – are offering payment in cryptocurrencies to drug cartels.
Underregulated online casinos and e-junkets have emerged as one of the most preferred avenues for money laundering by organised crime groups. This anonymised, technology-driven financial infrastructure has seen rapid growth in Southeast Asia, particularly in the lower Mekong countries. The region’s regulatory gaps and the relative ease of conducting transactions with crypto instruments have rendered these platforms highly attractive to criminal enterprises. As a result, crime syndicates are keen to exploit these vulnerabilities, expanding the region’s broader illicit economy by adding new networks and service providers and driving innovation.
Sovereign nations use cryptocurrencies to circumvent sanctions. The Russian President Vladimir Putin has publicly exhorted the citizens to adopt cryptocurrencies. In 2024, Russia enacted legislation permitting the use of digital currencies in international trade, marking a significant shift toward legitimising cryptocurrency transactions at the state level. Building on this legislative foundation, Russia launched its own stablecoin A7A5 in February 2025. This stablecoin is pegged to the Ruble and is officially registered in Kyrgyzstan, a key conduit for cryptocurrencies entering Russia.
Similar high-risk jurisdictions, such as Iran, Belarus, and Venezuela, are strategically transitioning to trade in digital currencies, with Iran lobbying BRICS members to accept cryptocurrency transactions. Venezuela, in particular, has reportedly received oil payments in the stablecoin USDT since 2024, thereby contravening the sanction regime imposed by the Trump administration.
Scouting for a strong legal foundation is inevitable to combat the growing menace of digital currencies becoming malicious instruments in the hands of criminal networks and rogue actors. A key priority lies in fortifying domestic legal and financial institutions. These institutions are essential for maintaining the trust, resilience, and credibility of the economic system amid evolving digital risks. Countries with underdeveloped legal and financial infrastructures face significant risks if they move to designate cryptocurrencies as legal tender, thereby jeopardising their monetary sovereignty.
Any laxity in robust global cooperation and in the implementation of stringent anti-money laundering (AML) and counter-financing of terrorism (CFT) measures risks emboldening the emergence of a parallel crypto economy. Without comprehensive oversight and coordinated international action, this unregulated or under regulated ecosystem poses a substantial threat to economic stability. It will garner the firepower to disrupt financial systems on a global scale, undermining confidence and security in the digital age.
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