Report: OTC Brokers Might Have Helped Criminals To Liquidate Billions in Bitcoin in 2019

An excerpt from Chainalysis 2020 Crypto Crime Report, which comes out fully later this month, suggests that OTC (Over The Counter) brokers might have facilitated the largest cryptocurrency money laundering in 2019.

In the report, cryptocurrency exchanges played as a common off-ramp for illicit crypto movement, and they have maintained the growth since the year. Binance and Huobi, two major exchanges in the crypto industry, appear to be the top destinations for crypto criminals. 

According to Chainalysis, $2.8 billion worth of Bitcoin was moved from criminals to exchanges with more than 50% of the transactions moved to both Binance and Houbi. 

Despite having KYC regulations, at least 300,000 individual accounts at Binance and Huobi got Bitcoin from criminal sources last year. Still, it remains unclear who’s behind those accounts, whether they are significant traders, and how they could users’ receive so much Bitcoin from criminal sources.

While it is true that the total illicit Bitcoin sums up to a significant amount, Chainalysis explained in a graph that the Bitcoin from criminal sources represents a tiny fraction of the total amount received by accounts in Binance and Huobi. 

Do OTC Brokers Own Most of These Accounts?

Notably, OTC brokers are associated with exchanges; however, they independently process several transactions between individual buyers and sellers who don’t want to transact on a public exchange. 

Playing as the primary source of liquidity in the digital currency market, the OTC market is quite huge, as it remains the one-stop-shop for traders to liquidate a large amount of cryptocurrency at a negotiated price. 

Although a few OTC brokers operate a legitimate business, most of them provide money laundering services to criminals, according to Chainalysis. Since they work with lower KYC requirements,  most of them take the advantage to help criminals launder and cash out funds.

They help the criminals by first “exchanging Bitcoin and other cryptocurrencies into Tether (USDT) as a stable intermediary currency before they presumably cash out into fiat,” per the report.

Tracking Suspicious Crypto Transactions

In August 2019, Chainalysis launched a real-time alert on its Know Your Transaction (KYT) to monitor suspicious crypto transactions. The KYT, according to the company, is an anti-money laundering (AML) compliance solution that helps to monitor transactions done in different cryptocurrencies. 


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