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FACT CHECK: Crypto is increasingly being used for criminal activity and is a haven for illicit…

May 6, 2021 3 min read
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One of the most widespread but false notions about crypto is that it is mostly used by bad actors for illicit financing.

It’s a tool of “kidnappers and extortionists” that is “contrary to civilization,” according to Berkshire Hathaway Vice President Charlie Munger.

This is false. Let’s look at a few key data points.

Myth #1: The majority of cryptocurrency transactions are for illegal activities.

The Facts:

Myth #2: More illegal activity takes place using cryptocurrency than with cash.

The Facts:

  • Good old-fashioned cash continues to be the funding of choice for criminals.

  • The UN estimates that ~$1.6 trillion in cash is laundered each year

  • Meanwhile, criminal activity in cryptocurrency actually fell quite dramatically,from 2.1% in 2019 to less than half a percent in 2020.

  • Despite the perceived appeal of cryptocurrency for money laundering, an estimated 99 percent of cryptocurrency transactions are performed through centralized exchanges subject to the same AML/CFT regulations as traditional banks.

Myth #3: Cryptocurrency makes it harder for law enforcement to investigate malfeasance.

The Facts:

  • Crypto is easier to track because searchable public databases (blockchains) already exist for the majority of transactions. Even the Department of Justice says so.

  • This gives law enforcement access to substantially more information than a case involving cash, including the date, time, and amount of the transaction, as well as the type of crypto used, the wallet address involved, and the unique transaction identifier (hash value).

  • Once that data is recorded in the blockchain, it cannot be altered retroactively, there is little risk of data loss, and confidentiality is maintained.

  • Immediately accessible with crypto, this kind of information can take law enforcement months or even years to obtain regarding cash transactions.

This data is already paying dividends to law enforcement, who has teamed up with private analytics firms to analyze blockchain transactions to identify individuals involved in illicit finance and pursue investigations into the dark web, child exploitation, and even terrorist financing.

These examples illustrate that crypto is not a haven for criminal activity or illicit financial dealings, but a medium for a wide range of secure, trackable transactions.


was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

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