I’ve been seeing quite a bit of content lately about how money laundering works in the crypto ecosystem, and honestly, it’s something all of us should understand better, especially those of us operating with stablecoins.

Basically, money laundering is that process where someone takes money from illegal sources and disguises it as legitimate income. It sounds complicated, but it works in three well-defined phases. First comes placement, where they introduce illicit funds into the financial system. Then comes layering, where they disperse the money across multiple transactions to cut off the trail. And finally comes integration, when they reinvest that laundered money into the legal economy.

Now, why has USDT become the tool of choice for this? I think there are several clear reasons. Liquidity is brutal—you can convert USDT to other assets or withdraw it to fiat currency almost instantly on any exchange. Cross-border transactions are super easy, completely bypassing the restrictions of traditional banks. And here’s the worrying part: unless you do KYC on a regulated exchange, your USDT address isn’t linked to your real identity. Mixing tools make it even harder to trace where the money is going.

The truth is, there are still quite a few regulatory gaps. Some exchanges don’t implement their KYC and AML policies properly. Direct P2P transactions don’t even go through an exchange, which increases opacity. And with daily transaction volumes in the billions, it’s practically impossible to detect individual anomalous operations. Money launderers know this and take advantage of it, making large transfers and withdrawing in batches to hide the origin.

As for common methods, I’ve seen reports of all kinds. Cross-border transfers where they convert illegal funds into USDT and send them to other countries to withdraw fiat afterward. OTC platforms where huge amounts of USDT are converted into cash or assets, avoiding oversight. Some even buy altcoins or NFTs to disperse funds through multiple transactions. And circular transactions—wash trading—where they transfer repeatedly between accounts to falsify records.

Real cases are quite illustrative. In May 2024, Lanzhou police dismantled a brutal case where a victim was tricked by her “boyfriend” into converting 2 million yuan into USDT and transferring it to a fake investment platform. They arrested 15 suspects with more than 35 million yuan involved. And in April 2022, the Ministerio de Seguridad Pública reported that criminals were using scoring platforms to convert illegal funds into USDT, hiding their origin through multiple transactions.

Looking at it in perspective, USDT has definitely become the preferred tool for these schemes because of its liquidity and ease of cross-border transfer. But here’s the point: this doesn’t just disrupt the financial order—it also threatens the entire reputation of the crypto industry. I hope that with strengthened global regulation, anti-money-laundering measures will improve significantly. Since money laundering affects the entire community, we all have a responsibility to keep these spaces clean.