Why Bitcoin is Bad for Criminals
With all of the misinformation and paranoia spread over the last six months about Bitcoin and now witnessing its recent increase in price, let’s look at one of the most severe accusations levied against BTC. It’s something of a classic, and the protest heard most from legacy institutions and regulatory agency politicians and those who might not understand Bitcoin and how it works. What you don’t understand can be scary. Until you realize its value, right, Jamie Dimon?
Helping Grandma in El Salvador
On June 9th, 2021, El Salvador became the world’s first country to pass legislation adopting Bitcoin as legal tender. President Nayib Bukele was met with mass approval from his supporters for this bold move. Yet, recently corporate media sources have reported a general discontent from some of the public there, interestingly citing fear of illegal use to be of concern.
Does anyone believe that the street vendors and local store owners, family members receiving Bitcoin from friends and family overseas, and the average citizen is losing sleep over this issue? Considering that 23% of the country’s GDP depends on remittances from expatriates working abroad and commission fees on these remittances average 30%, it’s easy to see the potential advantages of using BTC, primarily supported by the Lightning Network, used extensively in El Zonta and Punta Manga.
To see the big picture, consider that since 2001, the US dollar has been used as legal tender due to the instability of the Salvadoran peso. However, the impending dangers of rampant inflation have become apparent since the last year and a half of massive stimulus, adding trillions of dollars to the US money supply. So more believable protesters to Bitcoin’s use as legal tender in El Salvador would be from institutions like the IMF, World Bank, BIS, JP Morgan, and others holding a vested interest in the USD and its sacrosanct status as the world’s reserve currency. President Nayib Bukele and the people of El Salvador may be all too aware of the inherently deflationary quality of Bitcoin as a true hedge against inflation.
The Question of Anonymity
As for the general misconception of Bitcoin being easy for criminals to use, let’s consider the fact that most cryptocurrency transactions are not and cannot be anonymous but are “pseudonymous.” This is because all transactions are viewable on the respective cryptocurrencies’ blockchain explorer. Although wallets taking part in transactions are not connected to real-world identities, such as a person’s name, by default, it isn’t difficult to determine the owner of a wallet, tracing an alphanumeric address, since every user needs to utilize a fiat to crypto payment gateway at some point. These almost always require KYC documentation. Bitcoin was not built with privacy features, and its blockchain history may be publicly traced on its block explorer.
Case in point: regarding Bitcoin paid as ransom during the attack against the Colonial Pipeline, the FBI announced on June 7th seizing 63.7 bitcoins (worth $2.3 million) from a Bitcoin wallet of the Russia-based collective “DarkSide.” Recovery of the cryptocurrency ransom in such a short time did not surprise those who understand Bitcoin. Suspects shuffled BTC to various addresses to obscure their trail, and the FBI simply used the blockchain explorer to track it.
Getting Perspective
To understand Bitcoin’s role on the international crime scene, let’s look at the most significant money launderers of all time: traditional banks.
In a single year, the 5th-largest commercial bank in the United States, US Bank, was fined $613 million. Rabobank paid a total of $368 million in fines for facilitating money laundering and conspiring to conceal it. Citibank was fined $70 million, and Taiwan’s Mega Bank was fined $29 million for money laundering.
In January of 2021, FinCEN announced a $390 million Enforcement Action against Capital One for engaging in willful and negligent violations of the Bank Secrecy Act (BSA) and its implementing regulations. According to a 2020 report by SWIFT, “cases of laundering through cryptocurrencies remain relatively small compared to the volumes of cash laundered through traditional methods.”
Just the Facts
The fact is that the majority of cryptocurrency is not used by criminals. They know it’s a mistake. According to the latest Chainalysis’ 2021 report on crime, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (approximately $21.4 billion worth of transfers). By 2020, the percentage of all illegal cryptocurrency activity fell to 0.34%.
The UN estimates that between 2% and 5% of global GDP is connected with money laundering and other illicit activity annually. This means criminal activity using cryptocurrency is much less than fiat, with its use reducing annually.
Criminals Worldwide say Goodbye to BTC.
It seems even popular “darknet” sites are tossing Bitcoin aside as undesirable for purchases.
As they say, you can’t please all the people all the time. So intelligent and savvy criminals all over the world now say goodbye to Bitcoin.
Follow us at Beyond Enterprizes as we continue our journey across the constantly shifting terrain of blockchain and other cutting-edge technologies.
