Swedish FIU Labels Crypto Exchanges as Professional Money Launderers

While Sweden tightens the reins on its crypto sector, other countries are making strides in embracing the technology. Ireland is taking advantage of the EU’s Markets in Crypto-Assets Regulation (MiCA) to lead in crypto innovation and promote financial stability. In Eastern Asia, stablecoins are replacing fiat currencies. Hong Kong specifically is emerging as a key crypto hub. Meanwhle, South Africa is advancing in the crypto space, being the first African nation to license exchanges.

Sweden Takes Aim at Illicit Crypto Providers

Sweden’s Financial Intelligence Unit (FIU) and the Swedish Police Authority classified crypto exchanges as “professional money launderers” (PMLs) after analyzing unlicensed and illegal providers. According to the FIU, these PMLs have ties to criminal activities and help numerous people and networks launder money systematically. 

The FIU has identified four profiles of PMLs based on their services: the node exchange provider, the hawala exchange provider, the asset exchange provider, and the platform exchange provider.

Subgroups and characteristics of professional money launderers (Source: Swedish Police Authority)

In response to this growing threat, the FIU called for increased law enforcement involvement on cryptocurrency trading platforms to address these illicit activities. The report also touched on how important it is to target illegal crypto services and describes them as a crucial factor when it comes to enabling organized crime to expand its operations. 

In the report, licensed and legitimate crypto platforms were recognized for their role in combating money laundering. Swedish authorities also urged these platforms to monitor suspicious activities, stop fraudulent transactions, and offboard clients when necessary.

Swedish authorities have also turned their attention to the country’s Bitcoin mining sector. The Swedish Tax Agency investigated 21 crypto-mining firms between 2020 and 2023 and discovered that 18 of them filed misleading or incomplete tax information to avoid paying value-added tax (VAT) on taxable activities. 

This investigation resulted in a $90 million tax demand. Some of the mining firms appealed the decision, and two had their appeals accepted by the administrative court.

Ireland Embraces MiCA

Ireland is also making some changes to how it approaches crypto. The European Union was among the first regions to introduce a comprehensive regulatory framework for the crypto sector, with the Markets in Crypto-Assets Regulation (MiCA) coming into effect in June of 2023. 

Since then, the EU’s 27 member states have been working on their individual approaches to implementation. At the Association for Financial Markets in Europe’s annual European Compliance and Legal conference in September 2023, Derville Rowland, the deputy governor at the Central Bank of Ireland, shared that Ireland plans to stay at the forefront of safe innovation through MiCA. According to Rowland, MiCA is a major step for Europe to become a global leader in adopting these technologies to help build financial inclusivity and democratize finance.

MiCA at a glance (Source: Patrick Hansen)

MiCA introduces a harmonized regulatory framework for e-money tokens, asset-referenced tokens, and crypto-asset service providers. It establishes prudential and conduct obligations as well. There are also specific requirements for public offers of crypto-assets other than asset-referenced tokens or e-money tokens.

Rowland also revealed two priorities for MiCA’s implementation in Ireland. The first is to coordinate closely with other EU member states and European Supervisory Authorities (ESAs) to ensure consistent application across Europe, avoiding divergent regulatory approaches. The second is to improve the authorization process by actively engaging with the industry to clarify regulatory expectations. This will lead to better risk assessment and supervision.

Rowland firmly believes that Europe has to focus on creating financial stability and resilience in the sector to promote sustainable economic growth and competitiveness. She also pointed out that there is a need for Europe to close the innovation gap with the US and China, especially in advanced technologies. 

Across Europe, member states are already laying the groundwork to help businesses comply with MiCA. In Spain, plans to implement MiCA are six months ahead of the July 2026 deadline. The Central Bank of Latvia started offering free pre-licensing consultations for crypto companies.

Hong Kong Leads Crypto Adoption

Stablecoins and cryptocurrencies are gaining traction in some Eastern Asian countries as well, and are increasingly replacing fiat currencies. This is especially the case in regions with persistent currency devaluation and high inflation. 

A report by Chainalysis that was released on Sept. 17 revealed that Eastern Asia became the sixth-largest crypto economy, and accounts for more than 8.9% of the global crypto value received between June of 2024 and July of 2023. Stablecoins are considered to be a viable alternative to traditional banking, especially for cross-border transactions, which tend to be expensive in emerging economies.

Crypto value received by Eastern Aia compared to the rest of the world (Source: Chainalysis)

Maruf Yusupov, co-founder of gold-backed digital stablecoin Deenar, pointed out that stablecoins are gradually replacing fiat in many emerging markets and could reduce reliance on traditional banks. According to Statista, remittance fees in 2024 averaged about 7.34% when involving bank account transfers. This also proves the cost-saving potential of stablecoins. Eastern Asia received over $400 billion in on-chain value during the reported period.

The growing crypto activity in Eastern Asia is mainly driven by institutional and professional investors. This is evident by the large average transfer sizes. Institutions mainly use decentralized exchanges (DEXs) and decentralized finance (DeFi) services, which offer more arbitrage opportunities than centralized exchanges (CEXs), favored by professional investors. According to the report, Eastern Asia accounts for the largest share of professional-sized transfers globally.

Hong Kong’s ambition to become a global crypto hub is certainly becoming a reality. In fact, the region saw more than  85.6% growth in cryptocurrency adoption, which is the highest among Eastern Asian countries, followed by South Korea. Stablecoins played a big role in this growth, and represented more than 40% of the total value received in Hong Kong. 

Highest growing countries in eastern Asia (Source: Chainalysis)

On the other hand, it is important to remember that this growing adoption may lead to increased regulatory scrutiny. Yusupov warned that central banks may try to limit the impact of stablecoins on fiat currencies, and the rise in stablecoin usage could also attract new scam models. 

In July 2024, Hong Kong regulators introduced the first proposal for a new stablecoin licensing regime for fiat-backed stablecoin issuers. This could signal that the region is moving towards a structured oversight in the sector.

South Africa’s Crypto Market Thrives

South Africa is also stepping up as a key hub for digital assets in Africa. Ben Caselin, the chief marketing officer of Johannesburg-based crypto exchange VALR, pointed out South Africa’s favorable regulatory environment and independent judiciary, and believes it makes the country an entry point for crypto businesses into Africa. 

South Africa became the first African nation to license crypto exchanges, with 59 cryptocurrency platform licenses approved in 2023. Hundreds more applications are still being processed. Caselin expects South Africa’s regulatory framework for Crypto Asset Service Providers (CASPs) to mature even more, even though its clarity already surpasses many countries, including those in Asia and the U.S.

Despite regulatory progress, compliance costs have risen quite a bit. VALR even had to increase its workforce to manage the growing demands. 

Expected growth of South Africa’s crypto market (Source: Statista)

South Africa is also advancing as a technology hub, with blockchain solutions like AgriDex which facilitates cross-border agricultural trade and low transaction fees. According to Caselin, South Africa is very important as a digital asset hub because of its strong regulatory framework and advanced economy. This makes it a leading player in the global cryptocurrency market.