Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

Which type of cryptocurrency is associated with a higher money laundering risk?

1. Utility tokens.

2. Stablecoins.

3. Security tokens.

4. Privacy coins.

The correct answer is: Privacy coins.

Privacy coins are associated with a higher money laundering risk primarily due to their design, which emphasizes anonymity and obscured transaction details. These cryptocurrencies—such as Monero, Zcash, and Dash—utilize advanced cryptographic techniques to prevent transaction tracing, making it challenging for law enforcement and regulatory authorities to monitor or investigate the flow of funds. This characteristic can attract illicit activities, as individuals seeking to evade detection by financial authorities may choose to use privacy coins for transactions relating to money laundering, tax evasion, or other illegal activities. In contrast, utility tokens, stablecoins, and security tokens generally offer more transparency or are tied to regulatory frameworks that require compliance with anti-money laundering (AML) practices. Utility tokens are designed for specific applications within a platform and might not inherently promote anonymity. Stablecoins, often pegged to fiat currencies, facilitate easier tracking and are more explicitly subject to regulatory oversight. Security tokens represent ownership in an asset and are also governed by securities laws, which include stringent AML provisions. Overall, the structural attributes of privacy coins make them a higher risk in the context of money laundering, positioning them as the preferred choice for individuals looking to conduct transactions without revealing their identities.