Main conclusions

  • The idea that cryptocurrencies are wanted by criminals largely dates back to early media coverage of cryptocurrencies, particularly the Silk Road market story.

  • In fact, cryptocurrencies are used mainly by ordinary people to pay for purchases, transfer funds to each other and perform other everyday transactions.

  • Illicit transactions accounted for only 0.15% of all crypto transactions in 2021, according to Chainalysis, an independent blockchain research firm used by law enforcement and other government agencies.

  • According to the UN, between US$800 million and US$2 trillion is laundered annually in the world of traditional finance, which is around 2-5% of global GDP. The entire volume of illegal crypto transactions is only 0.03% of this amount.

We'll look at some of the most common beliefs about cryptocurrency, which form the FUD triad (fear, uncertainty and doubt), and separate fact from fiction.

The world of cryptocurrencies and blockchain has been growing rapidly over the past few years. However, a lack of understanding of this technology has led to a number of misconceptions that have led many people to view digital assets with unfounded suspicion and uncertainty. To help improve the situation, we have made it part of our mission to provide accessible Web3 education for everyone and are working to increase awareness of cryptocurrencies.

Through these endeavors, we aim to debunk common myths and promote crypto literacy. Our goal is to eliminate misconceptions and make cryptocurrencies more understandable to the general public. A deep understanding of the fundamentals and the ability to think critically help people better understand and start using cryptocurrencies. So, it's time to dispel the myths about cryptocurrencies!

Myth: Only criminals use cryptocurrencies

The use of cryptocurrencies for illicit purposes has been a concern since the early days of this new digital currency. The idea that cryptocurrencies are inherently associated with criminal activity (money laundering, drug trafficking, cybercrime) largely dates back to early media coverage of cryptocurrencies; in particular, the famous history of the Silk Road market.

Silk Road is an online black market that operated on the dark web from 2011 to 2013. It was a platform for the anonymous purchase and sale of legally prohibited goods and services for bitcoins. The market was notorious for its involvement in drug trafficking, and the use of cryptocurrencies for payment created a negative image of digital assets in popular media.

The anonymity and decentralization of cryptocurrency has raised concerns that it facilitates criminal activity. Many media outlets often choose to focus on high-profile cryptocurrency crime cases. This reinforces the idea that digital assets are mainly used by criminals who want to avoid detection.

Data Shows: Most Cryptocurrency Users Are Regular People

In fact, cryptocurrencies are used mainly by ordinary people to pay for purchases, transfer funds to each other and perform other everyday transactions. Binance alone has over 120 million registered users. As with any new (or existing) technology, criminals will always use it for nefarious purposes. It's worth noting, however, that just 0.15% of all cryptocurrency transactions were associated with criminal activity in 2021—down from 0.62% in 2020, despite the industry's explosive growth—and money laundering accounted for 0.05% of all transactions.

This is data from Chainalysis, an independent company that analyzes blockchain. Its data is often used by law enforcement agencies to combat crypto-crimes. In particular, the FBI, the Drug Enforcement Administration and the US Internal Revenue Service, as well as the National Crime Agency in the UK use Chainalysis information in their work.

According to the UN Office on Drugs and Crime, between US$800 million and US$2 trillion are laundered annually in the world of traditional finance, which is around 2-5% of global GDP. The entire volume of illegal crypto transactions is only 0.03% of this amount. Using cryptocurrency is unprofitable for criminals, because a permanent public record of transactions simplifies the work of investigators: unlike investigations in the traditional financial system, in the inherently transparent crypto space it is much easier for them to find fraudsters.

Transparency is not beneficial for criminals

Blockchain is inherently transparent: all transactions are recorded in a public ledger, and the entire code base is available to any user at any time. When using cryptocurrency, a clear paper trail is left behind, making it easy for law enforcement to catch criminals.

Europol and the Basel Institute of Governance have said that cryptocurrencies play a key role in the fight against organized crime. The fact is that it is simply impossible to transfer large amounts of cryptocurrency unnoticed. In addition, crypto exchanges continue to be one of the main allies in the fight against criminal activity. For example, in 2021, Binance helped uncover a cybercriminal group that laundered $500 million in ransomware attacks.

Law enforcement agencies remain at the forefront of the overall fight against crime. They are looking for new resources, skills and tools, and are working closely with cryptocurrency companies around the world. In the US, the Treasury Department has requested more funding to track and combat crypto-crime, and the Justice Department and FBI have created special task forces to regulate cryptocurrency.

Additionally, the Financial Action Task Force (FATF), the international anti-money laundering and counter-terrorist financing body, has issued standards for virtual assets similar to those for fiat assets. However, implementation of standards has been lagging: of the 200 countries committed to FATF standards, only 19 have implemented a standard for virtual assets (as of March 2023).

Conclusion

The idea that the cryptocurrency world is primarily a hotbed of crime is based on wildly exaggerated facts. In fact, the vast majority of cryptocurrency transactions and investments are completely legitimate and real use cases that have the potential to transform the global economy. The advent of blockchain technology has opened up new opportunities for financial innovation, and cryptocurrencies are just one aspect of this rapidly evolving field.

The use cases for crypto technologies and blockchain are very diverse: from decentralized finance (DeFi) to non-fungible tokens (NFTs). So far we have only seen the tip of the iceberg. Of course, problems and risks exist. However, it is important to approach this exciting new technology with an open mind and be willing to learn and adapt to realize its full potential. And it is also necessary to create protective mechanisms that will help protect people from the criminals that exist in any financial ecosystem.

Fact: Cryptocurrencies are mostly used by ordinary people. Independent data shows that only 0.15% of cryptocurrency transactions involve illegal activity. It is much easier to catch criminals if they use cryptocurrency rather than cash or the traditional financial system.

Additional Information

  • The Myth That Digital Assets Have No Intrinsic Value

  • The Myth That Cryptocurrencies Are Inherently Unsafe

  • The myth that cryptocurrencies are used for tax evasion