Crypto Can Fight Money Laundering Without Curbing Freedom

Crypto money laundering gets blamed for everything from ransomware payments to terrorism financing — but the numbers tell a different story. According to compliance experts, money laundering is at least twice as common in traditional finance, with more than 90% of illicit fiat flows never caught at all. So why is crypto carrying the scarlet letter?

Blockchain Sees More Than Banks Ever Could

Ana Carolina Oliveira, chief compliance officer at Venga, made the case in a recent statement that blockchain's architecture is not the problem — it's actually part of the solution. Every transaction leaves an indelible trace. When illicit funds move on-chain, that record doesn't disappear. Investigators can follow the money from wallet to wallet, across chains, across time. You can't do that with a wire transfer that passes through a correspondent bank in a jurisdiction that stopped sharing data three years ago.

The real issue, Oliveira argued, is not that crypto money laundering is rampant — it's that the current AML framework was built for a world that doesn't exist anymore. Traditional finance, centralized crypto platforms, and DeFi protocols each operate under different rules, different standards, and often different regulators. That patchwork is where bad actors thrive. Not because blockchain enables crime, but because the gaps between jurisdictions do.

Pseudonymity compounds the challenge. Self-hosted wallets don't come with a name attached. When mixers enter the picture — tools designed to obscure transaction trails — the already-imperfect picture gets murkier. That's not a crypto-specific flaw; cash has the same problem. But crypto's pseudonymity demands better cross-platform intelligence, not just stronger rules at individual exchanges.

Blockchain records everything for posterity. When money laundering does occur, an indelible record is created that allows the illicit financial flows to be traced from end to end.

Regulators Wrote the Rules. Then Left the Room.

Here's the part that deserves more attention than it typically gets: regulators handed crypto a mandate — build a SWIFT-like identification system for transfers — and then largely walked away. The EU AML Regulation 2024/1624, published recently, does establish some frameworks. But the gap between rules on paper and working infrastructure on the ground is enormous, and industry players are the ones paying to close it.

The Travel Rule is the clearest example. Designed to require crypto exchanges to share originator and beneficiary information — similar to how banks handle SWIFT transfers — the rule exists as a mandate across multiple jurisdictions. Yet, as Oliveira pointed out, the industry was effectively left to build the pipes itself. No standardized protocol. No government-backed infrastructure. Just an expectation that a fragmented, multi-jurisdictional sector would somehow figure it out.

Call it regulatory offloading. The rules got written; the implementation got outsourced. And for companies operating across the US, EU, and Asia — where thresholds, due diligence standards, and Travel Rule enforcement all differ — that compliance burden becomes genuinely labyrinthine. The loopholes those differences create aren't hypothetical. Bad actors know exactly where the weak points are, and they exploit them systematically.

Does Crypto Have a Money Laundering Problem or a Communication Problem?

The answer — at least according to Oliveira — is the latter. Individual exchanges, even the biggest and most sophisticated ones, see only a slice of what's happening on-chain at any given moment. Their transaction monitoring tools, wallet screening capabilities, and onchain analytics are strong in isolation. But isolation is precisely the problem.

Collectively, every crypto platform has a piece of the puzzle. When a suspicious wallet moves funds across three exchanges before cashing out, each exchange only sees one leg of the trip. If those exchanges shared intelligence in real time — the way financial intelligence units share data with banks — the full picture would emerge far faster. That's the gap Oliveira is pointing to, and she's right to flag it.

The Travel Rule crypto framework, the existing wallet screening tools, and on-chain analytics already form a reasonable first line of defense. What's missing is the connective tissue. Exchange-to-exchange. Platform-to-platform. Region-to-region. FIU to obliged entities. TradFi coordinating with CeFi. The technology exists. The will to coordinate is still catching up.

Collectively, all crypto platforms possess vast knowledge of who's doing what onchain, and when that 'what' strays into the realm of suspected criminality, that information must be shared.

What a Real Fix Looks Like

Oliveira's prescription is a global compliance standard — uniform rules, consistent thresholds, an industry-wide information-sharing network that doesn't stop at national borders. Crypto is borderless by design. Its compliance framework shouldn't have to clear customs every time it crosses a jurisdiction line.

Realistically, getting every regulator in every major market to agree to a unified framework is a long shot. The US and EU alone have spent years failing to harmonize financial rules that have existed for decades. Expecting them to build a new crypto-specific global standard on an accelerated timeline is optimistic at best.

That's why the onus, Oliveira said, falls back on the industry — but with an important caveat. Self-regulation without state backing has limits. National competent authorities need to do more than set rules and step back. They need to actively build and support the infrastructure that makes cross-border compliance possible. The industry can't carry this alone indefinitely. And the longer regulators treat it as someone else's problem, the more the bad actors win.

• Global compliance standard: unified AML rules across US, EU, and Asia with matching thresholds
• Exchange-to-exchange intelligence sharing: real-time flagging of suspicious wallets across platforms
• Regulator-backed infrastructure: state support for the Travel Rule pipe-building — not just mandating it
• Continuous typology updates: faster dissemination of new money-laundering methods as they emerge

Why This Matters for Everyday Crypto Users

If you've ever hit a wall switching exchanges — extra verification, transaction holds, declined transfers — you've already felt the cost of this fragmented compliance system. Every time a user changes platforms or crosses a regional boundary, they often run into fresh friction that has nothing to do with their legitimacy as a customer and everything to do with inconsistent regulatory standards.

Closing the loopholes that bad actors exploit doesn't mean tighter restrictions for regular users. Done right, it means the opposite. A coordinated system that knows a wallet is clean can clear it faster, with less friction. The current approach — treating every user as a potential risk because the cross-platform intelligence isn't there — is the worst of both worlds. Bad actors slip through. Legitimate users get stuck.

The compliance chief's argument is ultimately an optimistic one, even if it's framed around a serious problem. Blockchain gives regulators and exchanges more visibility than traditional finance ever had. The tools exist. The data exists. The only thing missing is the conversation — and that's a much easier problem to solve than rebuilding the technology from scratch.