Consumer Protection Tuesday: Blockchain as an Ally in the Fight Against Money Laundering

This post is part of a weekly Tuesday series at Coinbase about the latest consumer protection and security measures for crypto owners.

At Coinbase, we’re on a mission to help update the financial system to make it safer and more secure. While only 0.14% of blockchain transactions are used for illicit activity, and cash remains the preferred medium for illegal transactions, crypto security is always a top priority​. Coinbase maintains a robust compliance program, which includes Know Your Customer (KYC) checks, sanctions screenings, suspicious activity reporting, and strong law enforcement partnerships to detect and prevent illicit activity on our platform.

How Blockchain Disrupts Money Laundering Networks

🖋️ Blockchain’s Permanent Ledger Makes Transactions Visible

Unlike traditional financial systems, where transactions can be obscured through shell companies and offshore accounts, blockchain transactions remain on the ledger forever. Investigators use blockchain analytics tools to track illicit funds in ways that are impossible with cash.

⚠️ Crypto Exchanges Enforce Stringent Compliance Measures

Major crypto exchanges comply with global AML regulations through KYC requirements, transaction monitoring, and suspicious activity reporting. This mirrors the same AML policies enforced in banks, making it harder for criminals to misuse crypto.

🤖 Smart Contracts and AI Improve Fraud Detection

New technologies, such as AI-powered blockchain analytics, help identify suspicious transaction patterns faster than ever. Smart contracts can also automatically block funds from being transferred to blacklisted wallets.

Debunking the Myth that Crypto is for Criminals

While crypto crime garners a lot of attention, studies consistently show that illicit transactions account for less than .2% of total crypto volume​. Compare this to fiat currency, where trillions of dollars are laundered through traditional financial institutions each year.

Crypto’s visibility makes it an unlikely tool for large-scale laundering. In reality, criminals prefer cash, real estate, and offshore accounts.

Rather than undermining AML efforts, blockchain is setting new standards in financial security. Its transparency, automation, and compliance tools make financial crime harder. As governments and regulators continue embracing blockchain technology, financial systems worldwide will become safer, more efficient, and more accountable.