Bitrace Report Highlights Surge in Crypto Fraud and Stablecoin Freezes

Key Findings from the Reports

1. Stablecoins' Growing Role in Crypto Crime

According to Chainalysis's 2025 Crypto Crime Report, stablecoins are now involved in 63% of all illicit cryptocurrency transactions, marking a shift from Bitcoin's previous dominance in this area. ​

2. Money Laundering Techniques via Stablecoins

Bitrace's analysis reveals sophisticated methods of laundering money using stablecoins:​

Upward Transactions: Criminals sell stablecoins to accomplices at market rates and repurchase them at inflated prices, effectively paying for laundering .

Downward Transactions: Stablecoins are used for legitimate-seeming activities on platforms with weak AML/KYC protocols, such as online gambling, e-commerce, and payroll services. This reduces the risk of detection and account freezing. ​

4. Enforcement and Freezing Measures

Tether has actively collaborated with law enforcement agencies, including the U.S. Federal Bureau of Investigation, to freeze wallets associated with illicit activities. Notably, in December 2023, Tether and OKX froze $225 million in USDT linked to scams and human trafficking. ​

Implications and Outlook

The increasing use of stablecoins in illicit activities underscores the need for enhanced regulatory measures and robust AML/KYC protocols across cryptocurrency platforms. While stablecoins offer benefits like price stability and efficient transactions, their misuse poses significant challenges to the integrity of the financial system.​

Efforts by issuers like Tether to collaborate with law enforcement and implement freezing mechanisms are steps in the right direction. However, the effectiveness of these measures depends on widespread adoption of stringent compliance standards across the crypto industry.

3. Scale of Illicit Activity

Bitrace reports that in 2022, over $115 billion in USDT was associated with illegal activities in Southeast Asia, including online gambling and money laundering. Of this, approximately $14.6 billion flowed into centralized exchanges, potentially contaminating legitimate financial systems. ​$$ETH

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