How is Bitcoin used for illegal activities like money laundering?

Bitcoin can be used for illegal activities like money laundering due to its pseudonymous nature, which makes it difficult to trace the identities of users involved in transactions. Criminals exploit this feature by transferring illicit funds through multiple Bitcoin addresses, a process known as “layering,” to obscure the origin of the money.

Bitcoin mixers, or tumblers, further enhance anonymity by pooling together multiple transactions and redistributing the funds, making it harder to trace individual transactions. Additionally, the use of decentralized exchanges and peer-to-peer networks can bypass traditional financial oversight, facilitating the movement of illicit funds across borders without detection. These methods make it challenging for authorities to track and intercept illegal financial activities conducted using Bitcoin.