Cash, not crypto, remains criminals’ preferred tool for illicit financing, according to a study

Despite popular misconceptions, cash remains the dominant tool for illicit financing, while blockchain offers greater transparency and traceability, a new study shows.

A new study from Crypto ISAC shows that cash remains the preferred tool for criminals engaging in illicit financial dealings, despite widespread belief that cryptocurrencies dominate illicit transactions. While blockchain transactions create immutable records, making cryptocurrencies easier to trace, cash transactions leave no digital footprint, making it difficult to track illegal activities.

“The scale of money laundering and terrorist financing through traditional banking channels, as reported by regulators and law enforcement agencies, dwarfs the scale of similar activity observed in the cryptocurrency space.”

Crypto ISAC

Although cryptocurrencies have been linked to crime in high-profile cases, including stock market collapses and thefts, they only make up a small portion of total crypto volume. Crypto ISAC points out that while it is impossible to track the exact extent of illicit activity in traditional finance, the estimated amount of money laundered worldwide in a year is 2-5% of global GDP, or 800 to 2 trillion US dollars.

Meanwhile, blockchain analytics firm Chainalysis reported that only 0.34% of on-chain transaction volume in 2023 was linked to illegal activity.

Crypto ISAC noted that law enforcement agencies are increasingly using blockchain transparency to track illegal activities, positioning regulated crypto platforms as allies in fighting crime. At the same time, when criminals use traditional financial systems, there are no public sources through which law enforcement can easily trace funds, making it more difficult for law enforcement to track down criminals.

“This creates a higher burden of proof and requires the U.S. Attorney to appoint a panel and jury to hear and issue the subpoena. Only then can law enforcement begin putting together the forensic trail of the funds in question.”

Crypto ISAC

The US Treasury Department has also previously confirmed these findings, saying that cash remains the preferred method for money laundering due to its anonymity, stability and ubiquity. According to Treasury Department reports in February, bulk cash smuggling, which often involves moving U.S. dollar bills across borders and depositing them in accounts abroad, remains a common method for laundering illicit proceeds.