Centralized Exchanges Remain the Primary Crypto Money Laundering Conduits

The conviction of Roman Storm, co-founder of the notorious crypto mixer Tornado Cash, was hailed as a significant victory in the fight against crypto money laundering. However, the reality of the situation is more complex. For years, regulators have viewed mixers like Tornado Cash as the primary threat in crypto money laundering, but the data suggests otherwise. Centralized exchanges, which are licensed, regulated, and connected to the global banking system, are actually the most popular tools for laundering crypto funds. These exchanges, despite their compliance teams and 'Know Your Customer' verification checks, often allow criminal activity to persist, serving as the primary on and off-ramps for illicit crypto. To effectively combat crypto money laundering, regulators must bolster 'Know Your Customer' requirements and police centralized exchanges, where most money laundering occurs. According to a 2025 Chainalysis report, the majority of illicit crypto funds in 2024 were routed through centralized exchanges. These platforms are attractive to criminals due to their liquidity, speed, and global reach, allowing them to convert dirty crypto into spendable cash. High-profile enforcement cases, such as the U.S. Justice Department's settlement with Binance and the sentencing of BitMEX, have exposed the systemic nature of this problem. The issue lies not only with weak 'Know Your Customer' processes but also with the structural flaws in the system, which is designed to vet individual accounts rather than detect laundering patterns at scale. To make progress, regulators must focus on hardening centralized exchanges against money laundering by resourcing compliance teams, closing legal loopholes, and holding executives accountable for fraud. This requires a more proactive and collaborative approach, including the sharing of intelligence between exchanges and law enforcement, to prevent criminals from exploiting these platforms.