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Crypto Assets have become a new tool for child sexual exploitation, experts call for strengthened fund regulation.
Crypto Assets as Tools for Child Exploitation: Risks and Challenges
Recently, Taiwanese artist Huang Zijiao was involved in a scandal concerning pornographic images of minors, attracting widespread attention from all sectors of society. The incident is linked to a forum called "Creative Private Room," which has been selling a large number of secretly filmed videos, including those of minors, since 2012. It is reported that the website stores over 200,000 illegally filmed sexual images of minors and allows members to make payments using Crypto Assets. Among the members are new tech elites, doctors, teachers, and individuals from various professions, totaling over 5,000 people.
This article will conduct an in-depth analysis of the flow of crypto assets in this event and reveal the potential on-chain risks involved.
Analysis of Creative Private Fund Flows
Although Crypto Assets have a certain degree of anonymity, they can still be traced through professional means. By analyzing transaction records on the blockchain and anonymous addresses, we can transform this data into meaningful information and visualize the tracking, clearly showing the connections between various nodes.
According to public information, we have obtained the following several addresses used for receiving payments for illegal image transactions:
Data shows that these four wallets had a total fund flow of up to 3.582 million USDT from November 30, 2021, to April 10, 2024. By analyzing the forum's request "for convenience of confirmation, please transfer amounts like 248.98 or 250.01 with decimal points," we found that:
This indicates that criminal gangs are constantly changing their collection addresses and posting new messages to evade scrutiny, but there is still a continuous flow of anonymous clients and a large volume of transactions occurring.
During the on-chain analysis process, once funds flow into centralized exchanges, we can form on-chain address labels through models and share information with exchanges to mark risky entities, thereby linking on-chain tracking in the Web3 world with the real world.
After screening, we found 5 addresses that received over 20,000 USDT from the creative private address, with the highest amount reaching 67,700 USDT. These addresses are likely to belong to the actual beneficiaries of the sale of child sexual exploitation images. Further tracking revealed that these 5 suspected profit addresses are associated with multiple centralized trading platforms, indicating that these platforms may also be exploited by criminals.
The Application Trends of Crypto Assets in CSAM
Although privacy protection in the Crypto Assets field is important, the entity identity behind the address becomes crucial when it involves illegal funds. Many countries have begun to formulate relevant regulations to prevent the application of Crypto Assets in illegal areas such as CSAM, but the relevant legal and regulatory systems are far less mature than those in traditional payment sectors.
In traditional payment sectors, CSAM transactions typically involve bank accounts or other financial institutions, and these transactions are well-documented, making them easy for law enforcement agencies to trace and monitor. However, Crypto Assets provide a certain degree of anonymity for CSAM transactions, especially through the use of privacy-enhancing technologies, making it more difficult to trace the entities behind the transactions.
The application of Crypto Assets in CSAM not only reduces the risks for buyers (such as using mixers and encryption ATMs to hide payments) but also provides convenient ways for CSAM providers to launder and cash out funds (such as converting encryption earnings into fiat currency through peer-to-peer transactions). This has led to an increasing number of CSAM criminals turning to the use of convertible Crypto Assets to conceal illegal transactions in order to evade detection by law enforcement.
According to data from the UK IWF (a non-profit organization dedicated to eliminating illegal content online), the number of websites providing Crypto Assets payment for child sexual abuse images has "almost doubled every year." In 2021, out of 250,000 websites identified with child sexual abuse content, 1,014 websites allowed criminals to use virtual currency to access or purchase videos and images of children suffering sexual abuse and rape.
The report from the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department shows that between 2020 and 2021, financial institutions submitted thousands of suspicious activity reports involving Bitcoin, which were related to online child sexual exploitation and human trafficking crimes. Shockingly, 95% of these reports specifically pointed to the trafficking of Child Sexual Abuse Material (CSAM), with over 1,800 unique Bitcoin wallet addresses suspected of being associated with CSAM and human trafficking activities.
This data not only reveals the prevalence of Crypto Assets in child sexual exploitation crimes but also highlights the challenges faced by regulatory agencies in combating such criminal activities.
Conclusion
Crypto Assets, as an important innovation in financial technology, provide convenience to the global economy through their anonymity and decentralization features, but they also facilitate illegal activities.
Industry insiders believe that industry members should proactively use their expertise and technical tools to identify funds associated with such risky activities, which is an important means of resisting risks. Specific measures include:
Only with the joint efforts of all parties in the industry can we effectively curb the abuse of Crypto Assets in illegal areas and maintain a healthy encryption ecosystem.