Luxembourg Labels Crypto Firms as High 4m122y Risk Entities for Money Laundering

As per the Europol, the anonymity and transnational nature of crypto assets hamper investigation. 5m2o49

Written by Manas Mitul | Updated: 28 May 2025 20:30 IST

Luxembourg Labels Crypto Firms as High-Risk Entities for Money Laundering

Photo Credit: Unsplash/ Rodnae Productions 6yv41

PayPal and Standard Chartered offering crypto services in Luxembourg

Highlights

Luxembourg's crypto sector are now governed under MiCA rules
Europol is facing challenges in crypto fraud probes
The authorities have identified a rise in investment scams

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Luxembourg has raised a red flag against the misuse of cryptocurrency firms. In its 2025 National Risk Assessment (NRA) report, the country said that crypto companies were at a high risk of being exploited by money launderers. The report comes at a time when the crypto sector is showing gradual signs of expansion in the European nation, touted as the richest country in the world. Several other countries have also raised crypto-related concerns similar to the ones noted in the NRA report.

The NRA report said that Virtual Asset Service Providers (VASPs) were capable of facilitating crypto-based private transactions internationally, which made them highly vulnerable to be exploits by financial criminals.

"The use of crypto assets, especially with regard to investment fraud, has become more prevalent. Factors such as the increase in value of certain crypto assets and growing media attention around crypto investments are also contributing factors to the steady surge in investment fraud cases," the NRA said.

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As per the NRA, Europol, the EU's law enforcement agency, reported a rise in investment fraud and instances of Bitcoin to stablecoin conversion to add more privacy layers to transactions. The agency additionally noted that non-compliant crypto service providers with insufficient KYC details, especially those headquartered in offshore jurisdictions, were becoming money laundering modes.

The NRA report also highlighted that human traffickers and migrant smugglers in the region were heavily relying on cryptocurrencies to accumulate, hold, and transfer illicit earnings.

"The Grand-Ducal Police confirms in its annual reports that they are increasingly confronted with illicit banking activities, phishing and investment scams related to crypto assets," the NRA added.

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The anonymity and transnational nature of crypto assets hamper investigation and prosecution of these financial criminals, the report said, citing Europol.

"Europol confirms indeed that investment fraud generates millions of illicit profits and

crypto assets remain the most reported product offered to victims in this type of fraud," the NRA said.

Luxembourg is among the founding of the EU and hence its crypto sector is covered under the MiCA regulations. The country aims to increase its vigilance around illegal crypto activities now that MiCA is also in force.

In 2022, PayPal chose Luxembourg as its entry point into EU's crypto space.

In January this year, Standard Chartered bank also expanded its crypto services to the EU via Luxembourg.

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Further reading: Money Laundering

Radhika Parashar

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Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at [email protected]. More