By Patrick Woodall
More criminals, cartels, human traffickers, terrorists, rogue states, and sanctions evaders are using cryptocurrencies to hide and launder transactions and profits than ever. Crypto’s complex, cross-border, irreversible, high-speed, and easily anonymous transactions makes it the perfect vector to conceal hundreds of billions of dollars in illicit finance. The stark reality is that this money laundering and illicit financial activity is one of the only use cases for crypto (aside from speculative gambling).
It is an astronomical amount of dirty money sloshing around the crypto ecosystem:
- Chainalysis found at least $154 billion in dirty money flowed through crypto wallets in 2025 – nearly triple the $59 billion in 2024 — and most of that uptick was by rogue actors like Iran, North Korea, and Russia using crypto to evade sanctions and get funds to terrorist groups.
- The world’s biggest crypto platform Binance was used to move $1.7 billion to Iranian accounts, and Binance purged the internal investigators that found the transactions.
- This February, North Korean hackers stole $1.5 billion in crypto assets.
- A recent Bloomberg investigation found that drug cartels are using crypto to launder their profits, foiling law enforcement efforts.
- Wired ran an expose that documented the soaring use of crypto by human traffickers that exploit people on a global, industrial scale.
This undermines our national security and law enforcement by easily letting terrorists, rogue states, sanctioned oligarchs, and international criminals hide and move money that funds activity that threatens the country.
Crypto evades anti-money laundering laws that are critical tools for national security
The 9-11 attacks reemphasized the importance of stopping the illicit flows of money to terror groups and rogue states like North Korea and Iran. Identifying and preventing these illicit finance flows is critical to protecting national security. Banks and financial institutions have to flag suspicious transactions to prevent money laundering by terrorists, sanctions evaders, rogue states, and other criminals.
But crypto changed all that. The industry is ideologically hard-wired and structurally designed to resist any meaningful effort to stay on top of illicit money flows. Even the most mainstream crypto platforms frequently fail to stop money laundering and are resistant to shutting off the spigot of illicit finance. The biggest U.S. crypto exchange Coinbase has settled a $100 million money laundering case with New York state, faced a €3.3 million fine in the Netherlands for failing to report suspicious transactions for years, and was fined $4.5 million by the United Kingdom for repeatedly offering services to high-risk customers.
They make money on each transaction and it would cost them money to implement safeguards to clamp down on transactions tied to criminal groups, rogue states, or terrorist groups. The Coinbase CEO has called anti-money laundering rules “a policy failure” and said that preventing illicit finance was not worth the expense. Some platforms even market their products and services as anonymity tools.
This is telling because it’s really about their profits. To the cryptoverse, preventing criminal enterprises and terrorist networks is not worth the expense to their business model. But what about the rest of us?
Trump administration is letting crypto money launderers off the hook
The Trump administration has said it is taking a hard line on drug cartels, human trafficking, terrorists, and rogue states like Iran. But at the same time it has dropped the enforcement of money laundering cases against crypto companies with real, demonstrated failures to stop the flow of billions of dollars in illicit finance.
Nothing demonstrates the refusal of the administration to address crypto money laundering than its giveaways to the convicted money launderer Binance, the world’s largest crypto exchange. Binance’s founder, Changpeng Zhao, pleaded guilty and paid $4.3 billion to settle criminal charges for knowingly and willfully allowing sanctions evasion with accounts linked to Iran, North Korea, and Syria and laundered the proceeds of darknet transactions, ransomware, and scams. Treasury Secretary Janet Yellen stated that Binance ignored “its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform.”
Trump ultimately issued a full pardon to Zhao. (The pardon came after Binance became a critical early backer of the Trump family crypto enterprise World Liberty Financial and facilitated the $2 billion purchase of the Trump stablecoin masterminded by the Emirati spy sheikh.) He also pardoned the convicted founders of BitMex, which the Justice Department found was operating a “money laundering platform.”
So even as crypto money laundering surges, the administration appears to be ignoring the national security and crime risks.
Crypto legislation must confront illicit finance to protect people and national security
The propensity for crypto to be used by the worst criminal actors and organizations should be an incentive for legislators to prioritize ironclad, prescriptive language in the pending crypto legislation that greatly curbs crypto from being a vector for criminals, terrorists, and rogue states. It must apply not just within the United States but have global reach to effectively address the national security risks and threats posed by crypto. Members should be seeking ways to draft language that requires crypto firms — including decentralized (or DeFi) crypto firms — to root out and prevent illicit financial transactions and money laundering schemes.
The national security threats are not theoretical. If crypto exchanges are granted exceptions from the Bank Secrecy Act and anti-money laundering provisions, governments and law enforcement would struggle to quickly and effectively spot shady transactions that warrant close examination to find and interdict criminals and those that pose threats to national security.
The crypto industry wants broad brush exemptions from these laws — under the guise of protecting privacy but really to preserve profits. Coinbase’s CEO urged the rejection of any bill that applied money laundering laws to DeFi. But if Congress grants a crypto exemption to money laundering laws, it would be significantly more difficult for governments and law enforcement to unearth payment flows by drug cartels, human traffickers, and terrorist organizations.
Congress must stand up to crypto
Last week, the U.S Treasury Department froze $344 million in crypto assets to implement sanctions on Iran. This was possible because there is some information on the blockchain that enables analysis and tracking of transactions — demonstrating the capacity to track and trap these illicit financial flows. Yet the industry wants a total carve out — for DeFi and effectively much of the cryptoverse — that if established would make it significantly more difficult for the Treasury to take the action it did in April.
And this is why law enforcement is raising real concerns about the bill, including the Fraternal Order of Police, the National Sheriff’s Association, the National Association of Assistant United States Attorneys, and the National District Attorneys Association.
The crypto industry is demanding a hands off approach to monitoring suspicious transactions – the kinds that could be moving drug money or the profits from human trafficking or funding terrorism or shoring up rogue states. The crypto industry’s demands to protect their profits cannot outweigh the real and legitimate threats that underregulated crypto poses to national security and community safety.
The reality is that crypto has become a currency vehicle of choice for illicit finance, cartels, money launderers, and traffickers, who are attracted to the shadowy nature of the asset class which enables anonymous transactions of their unlawful acts. Congress must reject any legislation that allows the crypto industry to rake in profits by facilitating transactions that embolden these bad actors.