Main

  • Skeptics often argue that the cryptocurrency and blockchain ecosystem is unsafe for ordinary people because it is anonymous, untrustworthy, and widely used by criminal elements for illegal purposes. It is not true.

  • In fact, blockchain transparency is not a disadvantage of this technology, but an advantage. This system is open: information is available to users, regulators and law enforcement agencies around the world. In many ways, it is even more open than the traditional financial system.

  • The level of security on proven cryptocurrency platforms and services is in no way inferior to traditional banks and other financial institutions, and sometimes even exceeds them. Cryptocurrency platforms have implemented know-your-customer processes and tools to combat money laundering and monitor transactions.

Since blockchain is still a relatively new technology, there are many false claims and misconceptions surrounding cryptocurrencies. We'll look at some of the most common beliefs about cryptocurrency that form the FUD triad (fear, uncertainty and doubt) and separate fact from fiction.

Opponents of cryptocurrency often argue that the digital asset ecosystem is insecure because it is anonymous, untrustworthy, and widely used by criminal elements. As a result, those unfamiliar with cryptocurrency become convinced that everything associated with digital assets is dangerous and mainly intended for fraud, theft and money laundering. The radical version of this myth is that in the world of cryptocurrency there is no law at all.

This perception of the crypto industry is not only unfair, but also erroneous. In reality, the vast majority of participants in the cryptocurrency space are law-abiding citizens and businesses who use digital assets as a means of securely and efficiently transferring value online. Responsible players in this field also use effective protective mechanisms and systems that ensure the safety of users.

However, due to the illegal activities of malicious actors who make up only a small percentage of all participants in the crypto space, and the exaggeration of the scale and consequences of these actions by people who promote the myth of lawlessness in the crypto space, the entire crypto industry faces prejudice and damage to its reputation. To ensure that these misconceptions do not hinder the potential of blockchain and Web3, the entire industry needs to work to dispel this myth and prove that there is nothing about cryptocurrency that makes it inherently insecure.

How widespread is crime in the blockchain environment?

Let's start with the harsh reality that likely fuels this particular myth. Yes, hacks, fraud, and money laundering do occur in the crypto industry. It is not 100% protected from scammers and criminal activity.

Yes, you can always find news about how digital assets were stolen from someone or some platform. But these numbers don’t say much without context, and the examples given are often exaggerated to attract the audience’s attention.

Let us present specific figures that will help create a more truthful picture. The 2022 Crypto Crime Report, produced by blockchain analytics firm Chainalysis, found that just 0.15% of all cryptocurrency transactions involved criminal activity in 2021—down from 0.62% in 2020 year. Yes, crypto scammers took in $14 billion last year, but that's dwarfed by the roughly $2 trillion in fiat currency (or about 5% of global GDP) laundered through the traditional financial system each year.

The truth is that illegal activity makes up a tiny fraction of the total transaction volume on the blockchain, and for good reason: it is very, very difficult for criminals to cover their tracks using cryptocurrency. Blockchain transparency is not a disadvantage of this technology, but an advantage. The cryptocurrency financial system is open: information is available to ordinary users and law enforcement agencies around the world. But in the traditional financial system, crimes may go unnoticed for decades.

Transparency is an advantage

Generally, transactions on public blockchains are easy for anyone to track. In fiat systems, transactions are hidden from prying eyes and require a court order or decision to view them.

Every crypto transaction on a public blockchain ledger is tracked and verified, and its entire history is recorded. Each transaction forever leaves a trail of unedited records, so anyone can much more easily track the source of funds and their movement. Law enforcement agencies around the world fighting financial crimes have already learned to use the traceability of digital assets to find funds obtained through illicit means.

Blockchain also allows for money laundering risk analysis and reporting of such incidents. This checks the entire financial system rather than just tracking entry and exit points.

Illicit fiat proceeds can be hidden by mixing funds, falsifying accounts, or using offshore accounts; information in the blockchain can be studied in detail by anyone using a block explorer.

This ensures a higher level of security for the ecosystem.

Compliance with the requirements

Traditional financial institutions have had more than a century to create and improve processes and procedures to comply with regulatory requirements. But the fledgling cryptocurrency industry is quickly catching up, despite only being around for a little over a decade. In its first few years, there were certainly gaps in the area of ​​standard compliance practices: sanctions, anti-money laundering and identity verification systems.

Leading cryptocurrency platforms such as Binance have robust know-your-customer systems, anti-money laundering tools, and protocols in place to monitor and report suspicious activity and transactions to law enforcement. These mechanisms are the minimum security requirements for trusted digital asset platforms.

Crypto exchanges use the same high-quality tools to comply with sanctions and anti-money laundering laws in different countries as major financial institutions. Cryptocurrencies are becoming more widely used, and therefore identity verification protocols have become standard for most cryptocurrency exchanges. Robust verification systems minimize the risk of the platform being used by criminals for illegal purposes.

Responsible governance of the financial services ecosystem is based on two principles: ensuring user safety and complying with legal requirements. Binance and many other crypto exchanges do not provide anonymity to users. We have a strict identity verification policy: it is completely prohibited to register multiple accounts or hide your identity or sources of funds.

We also strive to prevent fraud proactively by monitoring blockchain activity in a variety of ways to ensure it is legal and compliant.

What is the harm of the myth of lawlessness?

In the early days of the crypto space, several high-profile news reports gave it an image of being dangerous and lawless, but the cryptocurrency space has come a long way since its birth. Leading cryptocurrency organizations, including Binance, understand that the sustainable and successful development of the global Web3 ecosystem requires ongoing cooperation with legislative authorities, including law enforcement. We must apply our knowledge to help them find criminals using cryptocurrency for illegal purposes.

We need to try to eliminate the misconception that cryptocurrency is dangerous and only useful to criminals. This way, legislators can confidently create policies that protect users and promote innovation, and people won't be afraid to join the Web3 movement because of inaccurate perceptions. Continuous development and support of the latest technological and financial innovations benefit both users and governments: these innovations create jobs and improve the overall efficiency of the economy.

Fact: With the right regulatory framework, blockchain technology becomes more secure than the traditional financial system. The misconception about rampant crime in the crypto space needs to be dispelled with fact-based information about security and compliance in the crypto world.

Additional Information

  • Debunking myths about cryptocurrencies. Part 1:

  • How to choose a reliable exchange

  • Binance's Commitment to Compliance