Money Laundering Risks Remain High for Crypto Exchanges, Warns Luxembourg Authorities
Despite a drop in trading volumes, Luxembourg authorities warn that crypto exchanges remain a significant money laundering concern due to their online operations and international reach.
Luxembourg’s National Risk Assessment Report Highlights Continued Money Laundering Risks
Crypto exchanges continue to carry high risks of money laundering, according to Luxembourg’s latest National Risk Assessment, which warns that the risks remain elevated despite a drop in transaction volumes over the past two years.
In the 2025 report, Luxembourg writes that the inherent risk of crypto businesses remains “high,” with the main drivers being “volume of clients/transactions and distribution channels, followed by size, ownership/legal structure, products/activities and the international nature of the business.”
According to the report, the use of crypto, especially with regard to investment fraud, “has become more prevalent,” adding further that the surge in fraud is linked to “the increase in value of certain crypto assets and growing media attention around crypto investments.”
Challenges in Crypto Investigations Highlighted
“The involvement of non-compliant crypto service providers with insufficient levels of KYC in offshore jurisdictions remains one of the main challenges in many cryptocurrency investigations as they often give rise to lengthy MLA procedures.”
– Luxembourg’s NRA report
Luxembourg-registered crypto exchanges processed 30.2 million transactions worth €106.8 billion in 2021, the data shows. But that figure fell to 19.7 million transactions worth €22.6 billion in 2023 amid declining market activity and heightened regulatory scrutiny. Most users remain retail investors, with the report stating that “almost all clients (99%) were natural persons,” and the number of politically exposed persons was “very limited.”
Despite the decrease in transaction volumes, the risk of money laundering through crypto exchanges remains a top concern for Luxembourg authorities.
Regulatory Measures and Compliance Efforts
Luxembourg has been taking steps to address the money laundering risks associated with crypto exchanges, including implementing stricter KYC (Know Your Customer) procedures and enhancing regulatory oversight. The report highlights the importance of compliance with anti-money laundering regulations and the need for cooperation between jurisdictions to combat illicit activities in the crypto space.
As the crypto industry continues to evolve, it is crucial for regulators and businesses to work together to mitigate the risks of money laundering and ensure a safe and transparent environment for all participants.