How to Protect Yourself from “Dirty” Coins

by Kimi

Statistics claim that about 40% of transactions in the Bitcoin network are illegal. Against the backdrop of the total volume of illegal funds, these are mere pennies, but the magic of large relative numbers does its job. It is this indicator that opponents of cryptocurrencies often use to argue for the prohibition of digital assets. And they are not too worried about the fact that not only and even not so much cryptocurrencies are “dirty”.

What does the term “dirty” cryptocurrency mean?

Any money that is used in illegal activities can become “dirty”. And cryptocurrency is no exception. The list of criminal activities that discredit the money involved includes:

  • Hacker attacks.
  • Trafficking in drugs, weapons, people and other prohibited goods.
  • Buying and selling prohibited services.
  • Extortion.
  • Fraud.

There are already special AML services that help identify compromised coins, even if they came to you in a completely legal way. For example, if you sell honestly earned USDT to ETH on a dubious service, then you are at great risk of getting a “dirty” coin without even knowing it.

What is dangerous “dirty” crypt

Interaction with unverified coins is fraught with numerous problems. Reputable cryptocurrency exchanges will not process transactions with suspicious funds and may block your account. Accordingly, exchange BTC to ETH or other coins at the current market price simply will not work. They will have to be sold through P2P platforms or not very scrupulous exchanges with a dubious reputation. In this case, you will most likely have to either pay very high commissions, or sell coins cheaply.

Interaction with a “dirty” cryptocurrency threatens with very high fines for both the owner of the coin and the crypto exchange. Moreover, you will have to pay a fine even if you personally bought this coin, unaware of its dark biography. That is, to avoid major trouble, you must know for sure that your coins have a crystal clear reputation. 

It is worth remembering that cryptocurrency exchanges are required to report suspicious wallets to regulatory authorities. And most likely a solid platform will do just that for reasons of its own security. But that is not all. coins from a compromised wallet will be confiscated, even if you manage to prove that they were not involved in money laundering.

It is much worse if this cannot be proved, and it is quite sad if you unwittingly find yourself drawn into the circulation of illegal funds. Money laundering is criminalized.

How to protect yourself from “dirty coins”?

Avoiding problems associated with unfounded suspicions of money laundering is possible and not even very difficult:

  • Unless you are directly or indirectly connected to the dark web, you are better off avoiding cryptocurrency cleaners, mixers, and other similar services. First, the use of a mixer immediately arouses suspicion. Secondly, there is no guarantee that you will not receive compromised coins from the same source.
  • Trade digital assets on cryptocurrency exchanges that require KYC. This means that there are no coins with a tarnished reputation on the platform.
  • Get at least two crypto wallets: “clean” and “potentially risky”. Use the first one for coins coming from reliable sources, for example, income from legal businesses, reputable crypto exchanges, mining pools. The second one will be needed for coins coming from other sources, such as gambling and gaming platforms, through mixers, etc.
  • Well, the most reliable way is to use services that are created to check the history of transactions with the coins that you received. It can be AMLBot, Coinfirm, Elliptic, CipherTrace, ScoreChain, Chainalysis, or others lesser known.

If you are a business owner and accept payments in cryptocurrency, it makes sense for you to implement API integration into it and track transactions constantly. This is a reasonable precaution and such solutions will cost you orders of magnitude cheaper than even one suspicious coin in your wallet.

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