
The Use of Cryptocurrency for Money Laundering :
Trends, Impact, and Regulations
Cryptocurrencies, known for their decentralization and privacy, have emerged as a revolutionary financial tool. However, these same attributes make them attractive for illicit activities, including money laundering (ML) and terrorist financing (TF). In 2024, approximately $14.3 billion was laundered through cryptocurrencies globally, marking a significant increase due to the rise of decentralized finance (DeFi) platforms and privacy coins.
This article explores the mechanics of crypto-based money laundering, its global and regional impact, and the measures taken by regulatory bodies, including FATF recommendations and India’s regulatory response

Learn more about mixing services and DeFi exploitation: Chainalysis Crypto Crime Report 2024.
Impact of Cryptocurrency-Based Money Laundering
1. Financial System Risks
- Undermines trust in financial institutions.
- Increases compliance costs for banks and VASPs (Virtual Asset Service Providers).
2. Criminal Exploitation
- Terrorist groups and rogue states use cryptocurrencies to evade sanctions.
- Reports indicate that North Korea laundered over $1 billion in stolen cryptocurrency in 2024 to fund weapons programs.
Detailed analysis of North Korea’s crypto activities:Chainalysis Crypto Crime Report 2024 [https://blog.chainalysis.com/reports/crypto-crime-2024]
3. Market Volatility
- Criminal misuse impacts legitimate market adoption and increases regulatory scrutiny.
Global Regulatory Measures
1. FATF Recommendations
The Financial Action Task Force (FATF) plays a critical role in regulating cryptocurrency. Key recommendations include:
- Recommendation 15: Requires VASPs to implement AML/CFT measures.
- Travel Rule: Mandates VASPs to collect and share sender/receiver details during transactions.
- Risk-Based Supervision: Jurisdictions must monitor high-risk entities.
Access FATF’s full recommendations: FATF Crypto Guidelines 2024.
2. U.S. and EU Regulations
- United States: Under the Bank Secrecy Act, crypto exchanges must report transactions exceeding $10,000. FinCEN Compliance Rules.
- European Union: The Markets in Crypto-Assets (MiCA) regulation enforces stringent KYC norms for VASPs. European Commission – MiCA : https://commission.europa.eu/index_en
India’s Approach to Cryptocurrency Regulation
1. AML and Regulatory Framework
- Under the Prevention of Money Laundering Act (PMLA), 2002, cryptocurrency transactions are subject to AML compliance.
- RBI mandates KYC verification and UBO (Ultimate Beneficial Ownership) disclosure for crypto platforms.
RBI Guidelines: Reserve Bank of India Crypto Circular 2024.
2. FATF Compliance
- India has adopted FATF’s Travel Rule, mandating information-sharing for crypto transfers.
- FIU-India actively monitors VASP activities.
FIU-India Overview: FIU-India Reports.
3. Taxation Policies
- 30% tax on crypto gains and 1% TDS on transactions create audit trails, discouraging misuse.
Learn more: Income Tax Department of India.
Cryptocurrency offers innovation and efficiency but poses serious risks when misused for financial crimes.Regulatory bodies, including FATF, are taking proactive steps to curb crypto-based money laundering. India’s alignment with global standards, coupled with strict taxation and AML frameworks, demonstrates its commitment to combating financial crime.
To secure the future of digital finance:
- Governments must harmonize regulations globally.
- Financial institutions must adopt advanced compliance tools.
- Continuous monitoring and evolving AML measures are essential.
Additional Resources:
- FATF’s Crypto Compliance Report: FATF Official Website.
- India’s Crypto Tax Guidelines: Government of India.
Important to understand the following:-
1. VASP regulations & Travel rule
2. Implementing a Risk-Based Approaches
3. Mitigation Strategies
4. Regulatory framework
5. Useful tools for Blockchain Analytics & investigations