Cryptocurrency exchanges have hemorrhaged $750 million in the first six months of 2018, according to CipherTrace, a cybersecurity firm that works with banks and exchanges on blockchain security and co
Cryptocurrency exchanges have hemorrhaged $750 million in the first six months of 2018, according to CipherTrace, a cybersecurity firm that works with banks and exchanges on blockchain security and compliance. That figure nearly triples the total stolen in all of 2017, and the firm estimates losses could reach $1.5 billion by year's end.
The bleeding hasn't slowed since late 2016. Over the past two years, thieves have pulled $1.2 billion from exchanges. Hackers took $530 million from Coincheck in a recent breach. CypheriumChain lost $10 million. Thieves stole $1.5 million from Taylor, a crypto trading app.
Criminals immediately funnel stolen cryptocurrencies to money launderers.
A sprawling underground industry specializes in obscuring cryptocurrency trails. Services with names like mixers, tumblers, foggers, and laundries pool funds from multiple customers, scramble them together, then disperse them to new addresses. The goal is simple: break the link between sender and receiver, making it harder for authorities to trace stolen coins back to criminals. These operations pocket 1-3 percent per transaction.
BestMixer.io, Bitblender, Bitcloak, and Coinmixer rank among the most popular options. But exchanges aren't the only weak point. Cryptocurrency gambling sites, which operate with minimal Know Your Customer (KYC) checks, have become convenient laundries. Between 100 and 200 crypto gambling platforms operate, each one a potential washing machine. Criminals open accounts and either place token bets or simply withdraw funds to fresh wallets.
The numbers tell the story of an accelerating problem. In 2017, $266 million flowed through cryptocurrency laundering channels. Through mid-2018, that number had already hit $761 million.
Regulators have noticed. The Financial Action Task Force, which coordinates global financial crime enforcement, is weighing whether to make cryptocurrency exchange rules binding on its member nations. The U.S. Financial Crimes Enforcement Network (FinCEN) will probably follow with its own crackdown, targeting both laundering services and privacy-focused coins.
Dave Jevans, CEO of CipherTrace, sees the writing on the wall. "Until now, the lack of regulatory guidance has hindered the broader adoption of cryptocurrencies. Now we are seeing the big guys coming together asking for cryptocurrency AML regulation—it is inevitable, it will be unified, and it will be global," he said. Jevans, who chairs the Cryptocurrency Working Group at APWG.org, added: "There will be little room for privacy coins without AML or mixers in these KYC and AML regulated regimes. This will also be a wake-up call for virtual currency exchanges and financial institutions, exposing them to the risk of facing stiff penalties."
