Unmasking crypto crime: An analysis of China and Iran

To ensure the dominant position of the U.S. and its allies in global competition, focusing on technologies that have a widespread impact and offer asymmetric advantages is imperative. Cryptocurrency and blockchain technology are key players in this arena.

In a new panel discussion, Joan Heald, vice president of Intelligence Community and Defense Department software solutions for Chainalysis and Colonel David Hamilton, U.S. Army, Ret., threat finance exploitation consultant, join Scoop News Group to unmask crypto crime in Iran and China—highlighting notable trends, challenges and risks associated with cryptocurrencies in these countries.

“Iran and China are big players in bitcoin mining…and both are cut off from the global financial system, so we see a lot of sanction evasion. Iran, in particular, is using cryptocurrency to bypass the standard financial systems and go right into the global financial systems, despite sanctions,” says Heald.

Chainalysis’ research indicates Iranian bitcoin mining is well underway at a surprisingly large scale; from 2015 to 2021, they found that bitcoin mining funneled more than $186 million into Iranian services, most of it in 2021.

The impact of large-scale Bitcoin mining on Iran’s economy has been notable, leading to job growth and revenue infusion. “Iran is one of the few nations to implement a comprehensive policy for the use of crypto in international trade, which enhances the value of its mining output,” says Hamilton. However, there are concerns that if other nations adopt bitcoin as an alternative to the U.S., Iran and other actors may benefit from increased trade, free of sanctions constraint.

However, Heald adds that nation-state actors are not the only ones using crypto mining to enhance their money laundering capabilities. “We now see traditional cyber criminals doing the same. And a lot of this is solvable.”

The first and most important fix would be for mining pools and hashing services to more aggressively use tools like Chainalysis to check users’ fund’s origins and reject crypto from illicit addresses.

Additionally, the discussion delves into the connection between crypto and fentanyl trafficking in China. “Fentanyl is a huge concern in the U.S. and growing throughout the globe. China is a leading producer of fentanyl producers feeding that US market, and despite CCP intervention recently, Chinese organized crime is still the number one supplier of those chemicals,” says Hamilton.

“A crypto nexus exists, according to a Chainalysis blog that reported nearly 30 million in crypto transactions linked to addresses suspected to be associated with fentanyl production. And as in most drug cases, following the money is a very useful tactic and may have contributed to some of these enforcement actions,” he adds.

The guests emphasized the importance of tools like Chainalysis to trace the origins of funds and reject illicit transactions. They also highlight the need for governments to address the broader challenges of combating illicit activities in the cryptocurrency space. Law enforcement agencies and regulatory bodies must stay updated with the latest trends and adapt their strategies accordingly–conduct ongoing research, collaborate with industry experts, and continuously train and learn to enhance awareness and understanding of illicit activity.

Learn more about developing a comprehensive approach to crypto crime.

Read more here for further insights into the nexus of cryptocurrency and national security.

This video panel discussion was produced by Scoop News Group and underwritten by Chainalysis.