German authorities have shut down 47 cryptocurrency exchanges for their role in facilitating criminal activities, according to a joint statement from the Central Office for Combating Internet Crime (ZIT) and the Federal Criminal Police Office (BKA).

The exchanges were deactivated after the authorities determined they had been involved in money laundering. The ZIT and BKA claim that the platforms allowed users to exchange crypto and other digital assets anonymously, concealing the origins of illicit funds.

According to the authorities, this lack of adherence to legal requirements is a direct violation of anti-money laundering laws.

The exchanges enabled transactions without requiring users to register or verify their identities, violating the know-your-customer (KYC) principle. Authorities explained that such anonymous exchange services are a critical part of cybercrime operations.

Criminals, including ransomware groups, darknet traders, and botnet operators, reportedly used these platforms to convert illegal funds into regular currency.

In addition to closing the exchanges, German law enforcement secured extensive user and transaction data. Authorities aim to dismantle the infrastructure supporting cybercrime through these actions.

The authorities stated:

“For years, the operators of these criminal exchange services have led you to believe that their hosting cannot be found, that they do not store any customer data and that all data is deleted immediately after the transaction.

We have found their servers and seized them – development servers, production servers, backup servers. We have their data – and therefore we have your data. Transactions, registration data, IP addresses.”

The crackdown comes amid an intensified effort by German authorities to combat illegal crypto activities. Recently, the BKA collaborated with US authorities to seize the domain of Cryptonator, a platform found to have insufficient anti-money laundering measures.

In January, the BKA seized 50,000 Bitcoin from a piracy website that had ceased operations in 2013. These assets were later divested during a month-long selling spree in July.

Furthermore, German authorities recovered €90 million after shutting down ChipMixer. Other notable actions include the closure of Qakbot in 2023 and Emotet in 2021.

Germany’s Federal Office for Information Security (BSI) advised crypto users to secure their digital assets with hardware wallets.

In the LinkedIn post, the authorities declared hardware wallets the most secure method for storing digital assets, explaining that these devices can help to keep a user’s private cryptographic keys in offline or “cold” storage. This offline storage ensures the keys are secure until they are needed for a transaction.

The Information Security Office highlighted several risks associated with storing assets on third-party platforms like exchanges. Although exchange-based custody is more convenient, it is vulnerable to hackers, the BSI warned.

In contrast, the agency pointed out that self-custody wallets on phones or personal computers also have significant security flaws.

Given these risks, the BSI recommended hardware wallets as the best option for securing crypto. Pins protect these wallets and allow users to create secure backups.

Crypto hacks

This advisory comes amid the rise in crypto thefts. Chainalysis reported that the crypto industry lost nearly $1.6 billion to exploits and attacks in the first half of 2024.

According to the report, stolen funds inflows nearly doubled from $857 million to $1.58 billion, while ransomware inflows rose by approximately 2%, from $449.1 million to $459.8 million.

It stated that the average amount of crypto stolen per heist increased by almost 80% during the period due to the increase in the value of digital assets. It added:

“The number of hacking incidents in 2024 has only marginally outpaced that of 2023, rising at just 2.76% YoY. The average amount of value compromised per event has increased by 79.46%, rising from $5.9 million per event from January to July of 2023 to $10.6 million per event thus far in 2024, based on the value of the assets at the time of theft.”

Similarly, Scam Sniffer reported that crypto phishing attacks targeting individuals reached $341 million in the first half of the year, a significant increase from the $295 million stolen in all of 2023. The top 20 victims alone lost over $1 million each, amounting to $58 million in total.

The German government is intensifying its divestment of Bitcoin seized from a movie piracy website, adding selling pressure to an already jittery market.

According to Arkham Intelligence data, the government transferred 900 BTC, valued at over $54 million, in three transactions on June 25. Of these, 200 BTC were moved to the Coinbase exchange, another 200 BTC to the Kraken exchange, and the remaining amount to an unmarked wallet, “139Po.”

This substantial move is part of German authorities’ recent trend of large-scale Bitcoin transactions. Last week, approximately $195 million in Bitcoin was transferred to major exchanges, including Coinbase, Kraken, and Bitstamp.

Despite these transactions, the German government still holds 46,359 BTC, estimated to be worth over $2 billion, according to Arkham Intelligence. The substantial BTC stash was acquired by seizing nearly 50,000 BTC from the piracy site Movie2k.to earlier this year.

According to Bitcoin Treasuries data, Germany is one of the top five countries with a substantial Bitcoin balance, behind the United States, China, and the United Kingdom.

Bitcoin price struggling

The ongoing liquidation by the German government adds further volatility to the crypto market, with analysts closely monitoring these movements and their potential impact on Bitcoin’s price.

During the past day, BTC’s price fell to $58,500 for the first time since early May after bankrupt Mt. Gox revealed that it would begin Bitcoin repayments for its creditors. According to CryptoSlate’s data, the top digital asset has slightly recovered to $61,300 as of press time, recovering almost 5% from the local bottom.

Some market experts argued that this announcement spooked the market, fuelling substantial selling pressure on crypto trading platforms. Others believe that the current dip was fear-driven.

JAN3 CEO and Bitcoin bull Samson Mow said:

“Right now, this Bitcoin dip is purely sentiment and fear driven, not from selling of large holdings. Even when Gox coins come to market, if there are sales, they will likely be via OTC and will have minimal impact on price.”