WHAT IS A SERVICE DEPOSIT ADDRESS ON A CRYPTOCURRENCY NETWORK?
A deposit address is found on a cryptocurrency network to link deposits to user wallets. When someone wants to send cryptocurrency from one wallet to another, they do so by depositing the money through a deposit address. The deposit addresses found on cryptocurrency networks are not actually owned by the users but work to link deposits to specific users. Users can have multiple service deposit addresses and can generate new ones through their cryptocurrency network. These addresses can be used to conduct all types of business, as they are simply where crypto money can be deposited. Service providers use deposit addresses so people they are doing business with have a place to deposit their cryptocurrency. If you have legal questions related to cryptocurrency, then it is important to speak to an experienced attorney who can best help you.
HOW IS A SERVICE DEPOSIT ADDRESS USED FOR MONEY LAUNDERING?
Money laundering is a major part of any criminal activity that is financed by cryptocurrency. Those who use cryptocurrency to finance criminal activity do so because of its anonymity and would like to be able to convert the money to cash or other legal, usable funds. To help make this happen, cybercriminals use service providers to help them launder their money. Service providers that help cybercriminals launder money do so by using services like high-risk cryptocurrency exchange portals, online gambling, cryptocurrency mixing services, and financial entities that operate in high-risk areas. Users then transfer their laundered cryptocurrency to cash that can be used for legitimate activities or simply deposited into regular bank accounts since the money is now “clean.”
IMPORTANT 2020 CRYPTOCURRENCY MONEY LAUNDERING STATISTICS
In 2020, 270 service deposit addresses accounted for an estimated 55% of the cryptocurrency laundered, at an estimated value of $1.3 billion. A wider view looking at the top 1,867 service deposit addresses related to cryptocurrency money laundering in 2020 shows that these service deposit addresses accounted for 75% of cryptocurrency laundering in 2020, with an estimated value of $1.7 billion. Many of these deposit addresses are operated by third-party service providers who use “nested services” to help launder money. Nested services operate within larger financial exchanges, using over-the-counter brokers and other services to help cybercriminals launder their money through multiple exchanges. Illicit cryptocurrency funds that are laundered come from crimes such as ransomware, darknet markets, scams, child abuse material, terrorist financing, and stolen funds. The top countries that are estimated to receive illicit funds include the United States, Russia, the United Kingdom, Ukraine, Vietnam, Turkey, South Africa, South Korea, and China. Russia dominates the darknet markets by share through Hydra, the world’s largest online darknet market. Interestingly, Hydra only serves Russia and other Eastern European countries that speak Russian. These are just some of the statistics that stood out from the Chainalysis annual cryptocurrency crime report.
WHY IS THIS IMPORTANT?
Cryptocurrency analysts including Chainalysis believe that this concentration of cryptocurrency money laundering service providers puts those involved at a greater risk for takedown by authorities. Analysts believe there is a greater concentration of users to few service provider addresses in 2020 due to reliance on a small group of money laundering brokers. A few major crypto money laundering takedowns could cripple the industry (at least temporarily) and force those remaining to look towards other means, potentially away from cryptocurrency altogether. If you have legal questions about cryptocurrency-related fraud or have questions about your own case, then give us a call at Bajoka Law so we can help.
