Centralized Exchanges Are Still Criminals’ Favorite Crypto Money Laundering Tool

Dr. Jan Philipp Fritsche argues that regulators are misdirecting efforts by focusing on mixers like Tornado Cash while ignoring centralized exchanges (CEXs), which serve as the primary fiat on/off-ramps for illicit crypto funds. Despite appearing regulated with KYC checks, CEXs are the preferred laundering hubs because they offer the liquidity and banking connections necessary to convert dirty crypto into spendable cash, as evidenced by past enforcement actions against Binance and BitMEX. The article contends that current KYC processes are often superficial, easily gamed by sophisticated criminals using intermediaries, and structurally incapable of detecting laundering patterns at scale. To effectively combat crypto money laundering, regulators must shift focus to hardening CEXs structurally by demanding real-time pattern detection, adequately resourcing compliance teams, closing jurisdictional loopholes, and ensuring executives are held accountable when controls fail.

(Source：CoinDesk)