Research Shows Binance and Huobi Received 52% of $2.8 Billion Illicit Bitcoin in 2019

A new report shows that Binance and Huobi collectively received more than 52% of total $2.8 billion illicitly-gained Bitcoin (BTC) in 2019.

Chainalysis findings

According to Chainanalysis’ report from January 15, criminals transferred a total $2.8 billion in Bitcoin to cryptocurrency exchanges.

As exchanges have always been a convenient outlet for money laundering, two largest ones — Binance and Huobi — received 27.5% and 24.7% of illicit funds respectiveliy in 2019. Thus, these exchanges acquired more than a half of all illicit Bitcoin, while the other exchanges together received 47.8%.

75% of all illicit Bitcoin transactions conducrted by 810 out of 300,000 criminal accounts

Chainalysis states that Binance and Huobi received funds from 300,000 accounts associated with criminal activity in 2019. 810 of them were the highest-receiving ones, taking a total of over $819 million in Bitcoin, constituting 75% from the whole amount of accounts.

Illicit funds come mostly from OTC brokers

Chainalysis experts suggested that this activity can be driven by OTC (over-the-counter) brokers. As OTC trading is often conducted directly between the traders without the intervention of the exchange, it attracts criminals.

The company also noted that Know Your Customer (KYC) requirements are not so strict among OTC brokers, which provides great opportunities for criminals:

“The problem, however, is that while most OTC brokers run a legitimate business, some of them specialize in providing money laundering services to criminals. OTC brokers typically have much lower KYC requirements than the exchanges they operate on. Many of them take advantage of this laxity and help criminals launder and cash out funds, usually first by exchanging Bitcoin and other cryptocurrencies into Tether as a stable intermediary currency before they presumably cash out into fiat.”

Chainanalysis identified 70 out of 100 OTC brokers who possibly enable money laundering, registered on Huobi and receiving Bitcoin from illicit sources. Named ”the Rogue 100”, the list of OTC brokers includes ”extremely active traders who have a huge impact on the cryptocurrency ecosystem”.

According to the report, the amount of funds received by the Rogue 100 increased gradually from 2017, but skyrocketed in 2019. Those traders received a total of $3 billion in Bitcoin in 2019, with most of the funds coming from alleged Chinese Ponzi scheme PlusToken. This activity acclunts for 1% of total monthly Bitcoin transactions.

Response from exchanges

Speaking to Chainalysis, Binance’s chief compliance officer Samuel Lim stated that the exchange is set to fight criminal activity in crypto. He added that KYC requirements are kept in line with every jurisdiction Binance operates in, and that the exchange designs its own technology to curb illicit activities:

“We will continue to improve on our proprietary KYC and AML technology, as well as the third-party tools and partners we work with, to further strengthen our compliance standards.”

Huobi has not provided any comments yet.