Centralized Crypto Exchanges, Not Mixers, Drive Global Money Laundering

Roman Storm, co-founder of the crypto mixer Tornado Cash, was recently convicted in New York for conspiring to operate an unlicensed money-transmitting business — a ruling hailed by prosecutors as a win against crypto money laundering. However, the truth behind illicit crypto flows is far more complex.

For years, regulators have portrayed crypto mixers like Tornado Cash as the main tools for laundering digital assets. Yet, data from a 2025 Chainalysis report shows that centralized exchanges — not mixers — remain the real laundering hubs. These platforms, often licensed and regulated, serve as the final stop where criminals convert illegal crypto into fiat currency. Their liquidity, speed, and access to global banking systems make them irresistible for illicit actors.

While exchanges boast strong Know Your Customer (KYC) programs, many compliance systems are weak or poorly enforced. Some rely on automated verifications that can be fooled by fake IDs or stolen data, while others outsource compliance entirely. Even effective KYC cannot prevent launderers from using straw accounts or shell companies to disguise illicit flows.

The structural flaw lies in the system itself: KYC targets individual users, not the large-scale laundering networks that span multiple accounts and exchanges. Enforcement actions against Binance and BitMEX have already revealed how gaps in compliance enable billions in criminal funds to pass through legitimate channels.

To combat crypto money laundering effectively, regulators must strengthen oversight of centralized exchanges. This means investing in real-time transaction monitoring, improving cross-border data sharing, closing jurisdictional loopholes, and holding executives accountable for compliance failures.

Until regulators address the systemic weaknesses of centralized exchanges, focusing on mixers alone is like locking the windows while leaving the front door wide open. Real progress depends on fortifying the financial gateways where laundering truly occurs.