Fact or Fiction: Crypto is the currency of criminals
One of the most common criticisms of cryptocurrency is that it is the currency of criminals. Jamie Dimon, CEO of JPMorgan Chase, the biggest bank in the US, famously said “If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars,”
Treasury Secretary Janet Yellen, when referencing terrorist financing, stated “The technologies to accomplish this change over time and we need to make sure that our methods for dealing with these matters, with tech terrorist financing, change along with changing technology, cryptocurrencies are a particular concern.”
So, is there truth behind this? Are cryptocurrencies really the go to financial tools for criminals?
Without a doubt, there are examples of cryptocurrencies being used for nefarious purposes, such as payment for ransomware attacks, to launder dirty money, etc. This is unavoidable, as it is with any currency. I mean, criminal activity happened before crypto existed, and had no problem operating in national currencies such as the US Dollar.
Many of the critics of Bitcoin have themselves been involved in dirty money. Let’s take HSBC, for example, the sixth largest bank in the world. Back in March 2021, HSBC banned their account holders from purchasing MicroStrategy stock, stating their distaste for cryptocurrency and securities that derive value from them. What’s interesting, is that HSBC has a well document history of profiting off of money laundering schemes for drug kingpins.
The point here, is that it is easy for Big Bank CEOs or government officials to trash talk cryptocurrencies for their ability to facilitate illegal financial transactions while conveniently leaving out the fact that many legacy financial institutions have themselves participated in billions, if not trillions, of dollars’ worth of dirty money transactions in the past.
So, how much of the cryptosphere actually goes towards criminal transactions? One report found that 2.1% of all cryptocurrency transactions in 2019 (or roughly $21.4 billion dollars’ worth), were for criminal purposes. This number fell to 0.4% (or $10 billion) in 2020. Now, in comparison to the US Dollar, one estimate by economist Ken Rogoff (who it turns out is quite the Bitcoin sceptic) is that roughly one third of all US currency in circulation is unaccounted for, likely meaning it is either used by criminals or tax cheats. It’s hard to say specifically what percentage of that 33% goes directly to criminal purposes, but I’d venture a guess that it’s greater than 0.4%. I think this is certainly a safe bet given that the UN Office on Drugs and Crime estimates that between $800 billion and $2 Trillion is laundered globally in one year.
Can cryptocurrency be used to facilitate financial transactions in support of illegal activity? Absolutely. Does this mean that cryptocurrencies are inherently evil and should be shunned? Absolutely not, especially when other official currencies are used for criminal activities to massive extents. Criminal activity will happen no matter what financial tools exist. The problem is the criminal activity, not the currency.
Furthermore, the scope of cryptocurrency goes well beyond simple financial transactions, and the blockchains underlying this technology have the potential to massively change the world for the better by creating systems that are freer, fairer, and work for the people, not the financial executives and their shareholders.
There is no point in denying that crypto is occasionally used by some for illegal purposes. But it would be foolish to focus solely on this while denying the good of crypto and blockchain and the massive potential for good in the future.
What do you think? Tweet us at @Crypto_Altruism, we would love to hear from you.
