Cryptocurrencies and Financial Crimes: The Role of Decentralized Cryptocurrency in Facilitating Money Laundering and the Challenges Posed on Anti–Money Laundering Regulations

Authors

Jeffry A. Collins, Mitchell Hamline School of Law

Document Type

Article

Abstract

This research examines the role of decentralized cryptocurrencies in facilitating money laundering and the challenges they pose to Anti–Money Laundering (AML) regulations through literature review and regulatory analysis. The study reveals that the decentralized, anonymous, and borderless nature of cryptocurrency enables illicit activities via cryptocurrency ATMs, mixing services, and decentralized exchanges (DEXs). For over a decade, the same regulatory problems persist today as were present at the inception of cryptocurrencies. Current AML frameworks, such as the Bank Secrecy Act and the Money Laundering Control Act, are inadequate for this decentralized ecosystem. The analysis critiques the fragmented efforts of U.S. regulatory agencies, identifying enforcement gaps and inconsistencies. To address these vulnerabilities, the paper proposes three solutions: mandating privacy–preserving technologies like zero–knowledge proofs for mixing services, requiring decentralized identity solutions for cryptocurrency ATMs and DEXs, and enhancing public education on cryptocurrency risks and safe practices. The study concludes with an urgent call for comprehensive regulatory reforms and educational initiatives to balance innovation, privacy, and security while combating money laundering in the cryptocurrency sector.

Recommended Citation

Jeffry A. Collins, Cryptocurrencies and Financial Crimes: The Role of Decentralized Cryptocurrency in Facilitating Money Laundering and the Challenges Posed on Anti–Money Laundering Regulations, 34 U. MIA Bus. L. Rev. 71 (2025).
Available at: https://repository.law.miami.edu/umblr/vol34/iss1/5