Opinion: Ethereum's upgrade has made it easier to see when illicit assets are on the move. That's a win for crypto forensics.
Yield is one of the core pillars of traditional finance . A rise or fall in yield leads to an increase or decrease in the perceived risk of other financial assets. Thus, movements in the benchmark rate set by the United States Federal Reserve provide the rationale behind investment decisions, in general.Accordingly, compliance professionals use trends in the risk-free rate to detect irrational movement of funds in capital markets, as such fund flows might be attempts to launder money.
Money laundering occurs in three stages: a) Placement: proceeds of crime enter the financial system; b) Layering: complex movement of funds to obscure the audit trail and sever the link with the original crime; and c) Integration: criminal proceeds are now fully absorbed into the legal economy and can be used for any purpose.
With Ether’s post-Shanghai staking yields providing benchmark interest rates for crypto, we can formulate baseline risk-reward structures. Armed with this, investigators can systematically spot financial behavior running counter-intuitive to trends in the benchmark rate.To illustrate, there might be a pattern where an address or a group of addresses that points toward an entity that consistently takes on high risk while earning below the risk-free rate.
Further, there has been a significant shift in activity from centralized exchanges to decentralized exchanges due to recent fiascos like the collapse of FTX. This increase in DeFi volumes has made it easier for illegal flows to remain obscure.
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