Ana Carolina Oliveira, chief compliance officer at Venga, argues that the narrative around cryptocurrency and money laundering is fundamentally flawed, often overshadowing its inherent capabilities to combat illicit financial flows more effectively than traditional finance. Far from being a haven for criminals, crypto, when properly understood and regulated, possesses intrinsic qualities that make it a powerful tool in the global fight against money laundering, ultimately fostering greater financial freedom for legitimate users.

The prevailing misconception that crypto is inherently a hotbed for money laundering is not supported by data. In fact, traditional finance (TradFi) remains the dominant conduit for illicit funds, with practices at least twice as prevalent and over 90% of money laundering activities in TradFi believed to go undetected. Money laundering is a universal problem, present wherever funds are transferred, irrespective of the underlying technology. This understanding is the crucial first step: recognizing that the problem is not crypto-specific, but rather a systemic challenge that digital assets are uniquely positioned to address.

The core advantage of blockchain technology lies in its immutable and transparent ledger. Every transaction, once recorded, creates an indelible, end-to-end record that allows for the tracing of illicit financial flows. Unlike the opaque, often fragmented systems of traditional banking, where funds can disappear into complex webs of shell companies, multiple jurisdictions, and untraceable cash transfers, blockchain’s transparency offers a persistent audit trail. While the identity of wallet owners might be pseudonymous, the transactions themselves are public and verifiable. This characteristic transforms what might appear as a challenge into an opportunity, enabling sophisticated on-chain analytics tools and specialized firms to identify, track, and flag suspicious activities with unprecedented precision. This capability far surpasses the often-manual and reactive methods employed in tracing fiat transactions, which frequently hit dead ends at jurisdictional borders or within the labyrinthine structures of global financial institutions.

Despite these inherent advantages, the current anti-money laundering (AML) system, across both traditional and digital finance (CeFi and DeFi), needs a significant evolution. This is not about singling out crypto for harsher scrutiny, but rather about strengthening preventive and investigative measures universally. Such an evolution demands greater communication within the financial sector, robust feedback mechanisms between regulators and industry, a deeper understanding of emerging typologies of financial crime, and more effective dissemination of new trends and threats. Regulatory frameworks, such as the recently published European Union AML Regulation (Regulation EU 2024/1624), provide a foundational step, but their true impact hinges on practical implementation that moves beyond mere "box-checking" compliance towards a dynamic, risk-based approach. This requires regulators and industry leaders to collaboratively build guardrails that are both effective in deterring crime and flexible enough to foster innovation.

The crypto industry, therefore, must proactively enhance its AML procedures. Overcoming its misunderstood reputation requires a constant commitment to strengthening barriers against illicit activity. This necessitates a fundamental cultural shift towards greater information sharing and collaborative intelligence. Without this, criminals will simply arbitrage regulatory differences, shifting their operations from highly compliant venues to softer targets within the crypto ecosystem or back to less scrutinized corners of traditional finance. Crypto "enables" money laundering in the same way fiat does; the architecture may differ, but the goal of bad actors remains consistent: facilitating activities from ransomware to terrorism. The challenge posed by blockchain’s pseudonymity, particularly with self-hosted wallets and mixers, is the difficulty in knowing the counterparty. This makes it harder to identify the origin or owner of funds, a problem mirrored in the use of offshore accounts and shell corporations in TradFi.

However, the collective intelligence within the crypto industry is vast. While a single exchange, no matter how robust its AML and Know Your Transaction (KYT) tooling, lacks complete visibility into all on-chain activity, the aggregation of knowledge across all crypto platforms offers an unparalleled view. When this collective insight identifies suspected criminality, the secure and compliant sharing of that information becomes paramount. Initiatives like the Travel Rule, wallet screening, and on-chain analytics form a powerful, nascent AML barrier. Yet, the responsibility and cost of developing the technological pathways for combating illicit activity are often delegated to individual entities. For example, the Travel Rule mandates a SWIFT/IBAN-style identification system for virtual asset service providers (VASPs), but the industry has largely been left to create the complex technology and integration solutions independently.

This effectively means regulators have outsourced the creation of a "crypto SWIFT system" to an industry characterized by multi-jurisdictional companies subject to diverse, geo-specific regulations. This fragmented approach creates a colossal and labyrinthine compliance burden, making a globally harmonized compliance standard not just desirable, but essential. Given the inherent difficulties in achieving rapid regulatory consensus across different regions, the onus has, once more, fallen significantly on the crypto industry to self-regulate and develop best practices. However, states and national competent authorities must step up, providing clearer, more unified regulatory guidance and enforcement to ensure a level playing field and effective global compliance.

The biggest current challenge in crypto money laundering isn’t the technology itself, but the difficulty in identifying wallet owners due to differing thresholds and rules across jurisdictions like the United States, EU, and Asia regarding information sharing, due diligence, and Travel Rule enforcement. These inconsistencies create exploitable loopholes for bad actors. Crucially, closing these loopholes will not only curtail money laundering but also empower legitimate users to truly enjoy the financial freedom that crypto promises. The freedom to transact, trade, and tokenize assets without encountering regulatory brick walls every time they change exchanges or cross regions is vital. Because crypto is inherently borderless, compliance frameworks must follow suit, working seamlessly and consistently across all geographies and platforms.

For the crypto industry to fulfill its potential, it must actively collaborate to share information, adopt universally accepted best practices, and unequivocally signal to the world that blockchain is open for legitimate business but absolutely closed to criminals seeking to hide their ill-gotten gains. The industry has already mastered the sophisticated AML tools available, from advanced on-chain analytics to robust identity verification systems. Now, it must master the "art of talking" – fostering seamless, secure communication and collaboration between exchanges, platform to platform, region to region, Financial Intelligence Units (FIUs) to obliged entities, and between traditional finance and decentralized finance. This comprehensive, collaborative approach is how crypto’s stance on money laundering will evolve from low-tolerance to no-tolerance. By achieving this, the industry will not only enhance its security and integrity but also unlock unprecedented trust and mainstream adoption, allowing it to flourish and deliver on its promise of a more inclusive and efficient global financial system.

Opinion by: Ana Carolina Oliveira, chief compliance officer at Venga.