Is anonymity in Cryptocurrency helping shield financial criminals?

Criminals have been using the anonymity allowed by cryptocurrency to engage in money laundering for years. Virtual currencies like Bitcoin, Ethereum, and even Dogecoin operate independently, without the watchful eyes of Central banks and strict regulations lingering upon them. This makes it extremely easy for anyone to trade with them.

Is Cryptocurrency really 'anonymous'?

However, though Bitcoin is that does not mean it isn't traceable. All cryptocurrency transactions are indeed stored in the system and can be traced- however they cannot be linked to real-world identity. To explain it in simple words, people can trade using Cryptocurrency under names- similar to how some authors write under pen names. When a person opens a bank account, it is mandatory to submit all sorts of documents to prove one's identity. Bank regulatory bodies like Central Banks dictate that proper KYC must be done for every customer. However, this is not necessary with cryptocurrency. A person can use a different identity for each transaction. These transactions may not always be associated with their actual identity. A person may be able to use multiple identities for each currency, making it difficult to trace them back to them.

The role of Cryptocurrency in financial crime

However, this has provided criminals with a way to transfer illicit funds faster and with convenience. The privacy that cryptocurrency allows has made it one of the most common mediums for money laundering. Due to this, AML and KYC policies are cracking down on suspicious transactions, which has made it possible to link the transactions using specific Bitcoins back to their owners. This includes using the IP addresses used during transactions back to their owners. It is more accurate to say that cryptocurrency is not anonymous, but pseudonymous.