China has kicked up a storm, turning its attention to major players in the offshore cryptocurrency exchange arena. A formidable force, China’s legal system is cracking down hard, hauling in top executives of these exchanges.
The primary bone of contention? Accusations of enabling vast transactions related to online gambling sites.
Stablecoins: A veil of legitimacy for dubious deals
Stablecoins, primarily Tether (USDT), have carved a niche as the cryptocurrency of choice for many industries due to the autonomy and flexibility they offer over traditional currencies.
Their rising popularity in online gambling is particularly concerning. China’s radar has been set off by the gargantuan sum – 7.6 billion USDT – that made its way to offshore exchanges in the past year alone.
This infatuation with stablecoins by gambling platforms is understandable. Tether offers a discreet way to move money in areas where gambling is outlawed, a situation China knows all too well. It’s a high-stakes game, where players use crypto, not chips.
Bitrace’s deep dive into this realm has revealed the extensive grip of USDT in online betting ventures. The alarm bells ring louder as this adoption may land both residents and platforms accepting such funds into treacherous waters, legally speaking.
The shadowy web of crypto-laundering in online gambling
The modus operandi is both cunning and straightforward: use online gambling channels to whitewash cryptocurrencies that have suspicious origins.
The structures enabling this are crypto payment services. While these services promise seamless transactions for gambling platforms, their blatant oversight of stringent Know Your Transaction/Anti-Money Laundering checks allows shady funds to flood in unabated.
For instance, Bitrace’s investigation into a crypto payment platform’s transactions showed that funds to the tune of 666,000 USDT, accumulated between late 2022 and mid-2023, were sourced from suspicious digital addresses linked to web scams and phishing platforms.
A closer scrutiny uncovers alarming numbers: 41,400 USDT from thefts, 36,400 USDT from shady dealings, and 15,000 USDT from other risk-laden sources. Online gambling venues have, inadvertently or not, become laundromats for illicit crypto.
These aren’t isolated incidents. The numbers scream collusion. A sample from 2023 revealed that 20 payment addresses, typically used for gambling settlements, recorded transactions amounting to a staggering 848,080,725 USDT tied to illegal activities.
This represents nearly 45% of their total income. It’s a clear indication that these platforms have been woven into the money laundering tapestry by nefarious entities.
The stain spreads to exchange addresses
Cryptocurrency exchanges aren’t insulated from this contagion. Take the heart-wrenching instance from California in 2022, where a woman was defrauded off nearly $980,000 in crypto.
The funds, on investigation, were found to have slithered into an online gambling pool. Out of this, 80,000 USDT was extracted by Chinese gamblers and injected into a notable exchange. The aftermath saw the courts freezing the account, terming the funds as unlawfully procured.
Databases indicate that these aren’t sporadic anomalies. The World Cup’s climax in 2022, for instance, coincided with a massive inflow of funds into exchange wallets.
The number? A mind-boggling 7.6 billion USDT, with smaller exchanges bearing the brunt due to their more lax risk mitigation measures.
This deluge of dubious assets via online gambling avenues into crypto exchanges is indisputable. It’s paramount for exchange operators to be on high alert against these compliance threats.