Gangster Al Capone famously used laundromats, cash-rich businesses at the time, to “clean” the proceeds of crime, mixing cash from legitimate customers with money earned from illegal activities. Drug barons such as Pablo Escobar struggled to deal with the sheer volume and weight of cash from cocaine sales, burying it or hiding bundles in secret walls in cartel properties — with some being found only years later as apartments were renovated.
These days, crypto assets are often depicted as linked to illicit financial flows. Sometimes attempts to regulate these assets are framed as a way to stop money laundering.
But the reality is that every single crypto transaction is made on a blockchain: a public, decentralised ledger. By contrast, nobody knows where the cash in your wallet has been or where it will go next.
But with digital assets such as bitcoin, every move is recorded. Software, and entire firms, exist to trace these flows, detect unusual patterns and flag what might be fraud or a scam. These firms link blockchain transactions to real-world entities and work with law enforcement to help them prosecute criminals.
Chainalysis, one such US-based firm, operates on almost 100 blockchains and maintains what are called “attribution databases” covering millions of firms and individuals. When cryptocurrency is moved off-chain and converted to fiat currency, in the case of suspicious transactions, they can usually link the crypto to its owner. The 2026 Chainalysis crypto crime report reveals that less than 1% of all crypto transactions are linked to illicit activities.
Yet, crypto gets unfairly stereotyped as the criminal’s asset of choice, though it’s cash that’s king in the underworld and is used to launder much more value.
In 2016 hackers breached the Hong Kong-based Bitfinex exchange, executing more than 2,000 unauthorised transactions to drain user accounts into a single digital wallet. The stolen bitcoin escalated in value and remained visible on the blockchain for six years. But when the two criminals, Russian-American tech entrepreneur Ilya Lichtenstein and his online influencer wife, Heather Morgan (known by her rap alias Razzlekhan), tried to move the coins, they were identified, arrested and later jailed in the US. About 94,000 of the 120,000 stolen bitcoin were recovered.
The idea that crypto is a secret way for criminals to steal, shift illegally earned money across borders or pay for illicit goods is out of touch with modern reality and modern technology.
Crypto asset service providers also invest in cutting-edge software to flag suspicious movements and protect users. Not only that, but exchanges comply with the so-called Travel Rule obligations, detailing who is sending cryptocurrencies and to whom, as well as reporting suspicious activities to the Financial Intelligence Centre.
Crypto is a valuable instrument for diversification in a well-balanced investment portfolio. What it isn’t is a criminal’s dream for laundering money. Just ask Razzlekhan.
De Wit is country manager for Luno South Africa
