Cryptocurrencies were initially driven by utopian ideals of decentralization and transparency. Now, they have become a threat to anti-money laundering efforts and the fight against crime. That is the finding of “The Coin Laundry,” an international investigation led by the International Consortium of Investigative Journalists (ICIJ) alongside 37 partner news organizations, including Le Monde.
At the heart of the matter are the failings of exchanges – physical and digital counters that bridge the crypto world and the traditional financial system, allowing users to swap digital assets for cash and vice versa.
The problem posed by cryptocurrency is built on a paradox. On the one hand, no system is as transparent: All transactions are publicly recorded on the blockchain. On the other, it is extremely opaque, as the holders of wallets, the crypto equivalent of bank account numbers, can remain anonymous as long as the funds stay within the ecosystem. This is why user identification relies exclusively on exchanges, which are supposed to act as sentinels when money enters or leaves.
Unlike the traditional financial system, where banks must verify their customers’ identities and monitor suspicious financial activity, many exchanges offer services to clients without conducting any checks. This allows them to take advantage of legal loopholes in some countries or blatantly violate the law in others.
Crypto ATMs in grocery stores
The rise of crypto ATMs illustrates the problem. These machines allow users to exchange crypto-assets for cash (and vice versa) in seconds without providing any proof of identity. Such machines have proliferated worldwide. In France, several of these devices were installed a few years ago in community grocery stores in Paris and in the northern city of Lille. The installations, carried out by unidentified individuals and, crucially, without prior registration or authorization from French authorities, were illegal.
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