A "vulnerability" is created every time criminals convert from cryptocurrency to government-issued ones, an official with U.S. Immigration and Customs Enforcement said Tuesday.
Matthew Allen, an assistant director of domestic operations with the Homeland Security Investigations (HSI) division of ICE, discussed the role of cryptocurrencies in drug trafficking during an October 3 hearing before the U.S. Senate Caucus on International Narcotics Control.
"On dark net marketplaces and other 'unindexed' websites, purchases are often paid for with cryptocurrencies such as bitcoin and monero, among many others," he said in a prepared statement.
Perhaps most notably, he noted that HSI is having some level of success in tracking criminals who use cryptocurrencies to launder proceeds from drug sales.
While cryptocurrencies make transferring value relatively easy, he contended, criminals still need to convert cryptocurrencies into fiat – and vice versa – during the process. "Whenever monetary exchanges are made, a vulnerability is created," he went on to say.
"This is the time when criminals are most susceptible to identification by law enforcement means and methods," Allen stated, explaining:
Allen went on to discuss multiple types of cryptocurrency exchanges and how they may be used to facilitate money laundering. Peer-to-peer exchanges in particular, referring to startups which refuse to register as a money services business and do not follow compliance laws, are often used to ensure users remain anonymous.
Despite that, however, national and international agencies are training investigators in how to best track cryptocurrencies, he said.
"We train investigators ... in an effort to deter organizations from laundering proceeds or using cryptocurrencies to fund the purchase of fentanyl/opioids or other narcotics," he said.
ICE logo image via chrisdorney / Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.