The Bitrace report zeroes in on stablecoin mining methods.
Money laundering is sometimes the source of distortions in stablecoin prices, blockchain researcher found in the investigation of transactions with Bitrace Tether (USDT). Depending on the situation, counterfeiters may trade USDT at below-market rates.
In a translated report published by Wu Blockchain on Medium on December 26, Bittress listed two scenarios for using the stablecoin for money laundering. In the “up” case, one stable coin is sold by the bad actors to the counterfeiter at market value, and then another stable coin can be bought by the bad actors at an inflated price, the difference being used as payment for the services of the outfit.
Illegal USDT transactions could devalue the stablecoin by 8-10 Chinese yuan (RMB), the report said. At the time of writing, RMB 7 is trading at US$0.98.
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In illegal “downstream” transactions, Stablecoin is used for legitimate purposes on other platforms that do not have comprehensive Anti-Money Laundering/Know Your Customer (AML/KYC) measures in place.
“Some proxy payment platforms accept USDT deposits and use fiat funds to help users make payments on other platforms, including top-up on online gambling platforms, member fund-to-fund platforms, giving gifts on live streaming platforms, and placing orders on e-commerce platforms. . As well as paying wages to workers.
Due to weak AML/KYC verification, sellers of “downstream” stablecoins face the risk of “reverse freezing,” which is the act of freezing accounts that receive crypto associated with criminal activity. In these cases, USDT can be sold at a discount of 0.05 to 0.3 RMB.
BitTrace followed the example of USDT pegged to Tether and the OKX platform. The criminal group used popular cryptocurrency exchanges such as FTX and Binance, as well as OKX, to transfer the stablecoin to “more centralized trading platforms, payment platforms and even online gambling platforms.”
The report indicated that in both the up and down scenarios, the criminal group does all its transactions in statcoins and is not exposed to fiat.
Section 12 of the Uniform Commercial Code, currently being adopted by state legislatures in the United States, protects the claims of users of digital assets received in good faith, even if the assets have previously been linked to criminal use.
Beatrice Teter said the US Federal Bureau of Investigation has entered the scene in cooperation with law enforcement. Bitras first published the report on December 17.
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