In brief

  • Banks might be missing up to 90% of crypto trading volume while looking for illicit activity, says CipherTrace.
  • The researchers noted that financial institutions' home-grown systems are mostly focused on the top 100 exchanges.
  • All the while, unregistered or illicit exchanges and crypto kiosks could be flying under the radar.

Financial institutions could be missing up to 90% of cryptocurrency-related transactions because they ignore smaller digital asset exchanges, according to the latest report by blockchain forensics firm CipherTrace.

“CipherTrace research has found that a typical name-based system may entirely miss up to 70% or more of the crypto exchanges out there, and up to 90% of the actual transaction volume,” said the researchers.

Per the report, titled “Best Practices for Monitoring Virtual Currency-Related Transactions at Your Bank,” many banks are using “home-grown” systems that take only the largest crypto exchanges into account, ignoring hundreds of smaller platforms.


“Most open-source lists are incomplete, perhaps covering the top 100 exchanges, leaving out the other 600+ exchanges. Even if customers were transacting with a cryptocurrency exchange you had on the list, many exchanges do not operate business under their popular name,” said CipherTrace.

This results in a lot of crypto-related transactions flying under the radar—the ones conducted via unregistered or illicitly operating P2P exchanges, money service businesses or crypto kiosks, for example, the report said.

CipherTrace has been busy making it harder for folks to flaunt anti-money laundering regulations. Binance seems onboard.
CipherTrace is a blockchain analytics firm. Image: Unsplash.

Additionally, banks’ own systems are often using name-based recognition methods which could lead to large amounts of false-positive results.

“This becomes obvious if you take an exchange like ‘Gemini,’ which is not only associated with the famous exchange run by the Winklevoss twins, but also with everything from Gemini Middle School in Maine to Gemini the ‘elite interior and exterior wood coating manufacturer,’ Gemini the company ‘with 40+ years in the construction business,’ and numerous other businesses,” the report noted.

The researchers added that such systems “can result in a huge number of false positives, wasting time and effort.”


Among other suspicious activity to look for, CipherTrace also highlighted customers that are “significantly older than the average age of platform users” opening an account and conducting a large number of crypto transactions.

Such instances, especially if such a customer shows little knowledge of cryptocurrencies and might be involved with much more digital assets than they can seemingly afford, could indicate money laundering, a money mule or “a victim of elder financial exploitation.”

As Decrypt reported last April, major cryptocurrency exchange Binance has enlisted CipherTrace to boost compliance and expand into new markets. But perhaps it is much smaller platforms that banks should be worried about.

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