The Center on Illicit Finance Sanctions at the Foundation for Defense of Democracies, together with blockchain analytics firm Elliptic, released a study tracking the flow of illicit funds through the Bitcoin economy from 2013 to 2016. The research concluded that funds of illicit origin represent less than 1% of all Bitcoin transactions. These illicit flows decreased sharply as the cryptocurrency gained mainstream adoption.
Details of the study are summarized below:
Bitcoin transactions for illicit purposes, 2013–2016
The report notes that criminals quickly recognized certain properties of Bitcoin that could be exploited to further illicit interests, seeing the cryptocurrency as a potential way to evade law enforcement. The study emphasizes that much of the evidence about illicit Bitcoin use has been anecdotal, and it acknowledges that it is impossible to determine precisely how many bitcoins are used for illegal activities.
The research was intended to inform policymakers and leaders in the financial industry who want a clearer understanding of illicit financial risks associated with Bitcoin. The study aims to assist legislators in designing measures to combat money laundering and terrorist financing. Generally, Bitcoin users operate under pseudonymous addresses, which can afford a degree of privacy but do not guarantee complete anonymity.
Money laundering accounts for less than 1% of Bitcoin transactions
The report’s findings indicate that the rate of money laundering associated with Bitcoin is low. The analysis found that only a small share of Bitcoin activity could be attributed to illicit sources. Online gambling platforms were identified as responsible for the largest share of laundering activity observed, with results suggesting that 97% of inbound transfers to certain gambling sites were linked to illicit funds. The bulk of identified illicit Bitcoin transactions were processed within Europe.