Русский
EnglishWhy a cryptocurrency account might get blocked
Cryptocurrencies are popular because they are secure and not controlled by any one group. However, these same features attract criminals who use them for illegal activities like money laundering and funding terrorism. Sometimes, users unknowingly receive “dirty” money, which can lead to their accounts being blocked or even legal trouble. To avoid this, it’s important to check the cryptocurrency wallets you interact with. There are special AML services that can help check if a wallet is involved in illegal activities, reducing your risk.
What is Blockchain? Pseudonymity of Blockchain
How blockchain works
Blockchain consists of a sequence of blocks that contain transaction records. Each block is linked to the previous one through a hash, creating a chain of data. An important aspect of blockchain is its decentralized structure: data is stored on multiple nodes (computers) in the network, making the system resistant to hacking and manipulation.
Advantages of Blockchain
Decentralization allows transferring funds without intermediaries such as banks, which reduces transaction costs and increases the speed of processing operations. The use of cryptography ensures a high level of security, protecting data from unauthorized access and fraud. Systems like Bitcoin and Ethereum, due to a large number of participants, are virtually impossible to hack.
Pseudonymity of Blockchain
Despite its decentralization and apparent anonymity, blockchain is only pseudonymous. Here are some key features of this aspect:
- Wallet Addresses: In blockchain, each user has one or more wallet addresses that act as pseudonyms. Information about the owners of these wallets is not centrally collected, and the blockchain records only the transactions between addresses.
- Blockchain Explorers: These are specialized tools that allow users to view and analyze blockchain data. They enable any user to obtain detailed information about transactions, including amounts and the addresses of senders and recipients. Some well-known blockchain explorers are Etherscan for the Ethereum network and Blockchain.info for the Bitcoin network.
- Data Linking: Although blockchain does not store personal data, wallet addresses can be linked to the identity of the owner through additional methods. For example, when using centralized cryptocurrency exchanges that require KYC (Know Your Customer) procedures, the exchange can associate wallet addresses with specific users.
- Analytical Tools: Modern analytics companies, such as Chainalysis and Elliptic, develop tools for tracking and analyzing blockchain transactions. These tools help identify suspicious activities and classify wallet addresses by risk levels. For example, if an address has been linked to darknet markets or fraudulent schemes, it can be marked as “high-risk.”
Why is it important to verify cryptocurrency addresses and transactions?
Cryptocurrencies are often used to finance crimes, trade illegal goods and services, conduct hacking attacks, and launder money. In 2022, the volume of cryptocurrency linked to illegal activities amounted to $20.6 billion, which is less than 1% of the total cryptocurrency volume. Regulatory bodies and analytical companies have developed tools for tagging and monitoring transactions and addresses, which helps in combating crimes.
Risks for cryptocurrency users
Automated algorithms analyze blockchain transactions, identify characteristic behavioral patterns, and group addresses into clusters. These data are verified and stored in the databases of analytical companies, allowing crypto services to restrict the use of accounts associated with “dirty” cryptocurrency. A user might not be aware that their transaction is flagged, and they could be automatically equated to accomplices in a crime, which could result in criminal liability.
How to avoid account blocking when dealing with cryptocurrency
To protect yourself from account blocking and avoid becoming an accomplice to crimes, it is essential to follow a few important rules. First and foremost, use reputable and well-established cryptocurrency exchanges and services that implement modern AML (Anti-Money Laundering) and KYC (Know Your Customer) procedures. Regularly completing KYC procedures not only helps to verify your identity but also minimizes the risk of account blocking due to suspicious activity.
It is also important to verify the origin of the funds and the addresses you plan to interact with. To do this, you can use blockchain analytics tools that help identify suspicious transactions and addresses. These measures can help you avoid unintentional involvement in money laundering schemes or the financing of illegal activities. Users are advised to carefully study the reputation of counterparties and avoid transactions with questionable partners.
How to ensure security when using cryptocurrencies
Principles of anti-money laundering (AML) include the following key tools
Customer Identification (KYC): Verify the identity of the account holder using official documents.
Transaction Verification (KYT): Analyze the source of virtual funds and identify risks using software.
Practical guide for cryptocurrency users
To avoid becoming an accomplice in cryptocurrency crimes and prevent account blocking, users should take measures to secure their transactions. Here are some practical tips:
- Use reputable exchanges and services:
- Choose cryptocurrency exchanges and wallets with a good reputation that implement modern AML (Anti-Money Laundering) and KYC (Know Your Customer) procedures. This will help you avoid interacting with illegal funds.
- Verify addresses before sending funds:
- Before conducting a transaction, verify wallet addresses using specialized services such as WhoAML. These services can help ensure that the address is not associated with illegal activities.
- Research your counterparties:
- If you are conducting business using cryptocurrencies, it is important to know your counterparties. Conduct research and check the reputation of the companies or individuals you plan to interact with.
- Use multi-layer authentication:
- Enable two-factor authentication (2FA) on all accounts associated with cryptocurrency to protect your funds from unauthorized access.
- Comply with laws and regulations:
- Stay updated on cryptocurrency legislation and strive to comply with all requirements and standards to avoid legal issues.
Conclusion
The cryptocurrency market includes both legal and illegal aspects. The increase in media mentions of cryptocurrency crimes is associated with the growing interest in cryptocurrencies and the need for their regulation. Blockchain analytics tools help tag and monitor transactions, aiding in the effective fight against crimes and improving market transparency.
By following best practices such as using reputable exchanges, verifying addresses, researching counterparties, and enabling multi-layer authentication, users can protect their assets and reduce the risk of becoming involved in illegal activities. Staying informed about relevant laws and regulations and adhering to AML and KYC procedures will further help avoid account blocking and potential legal consequences. Taking these proactive measures allows users to enjoy the benefits of cryptocurrencies while maintaining a secure and compliant approach.