Bitrabo Editorial
According to a recent study, while it’s commonly believed that cryptocurrencies are highly favored for illegal activities, criminals still primarily utilize cash for their unlawful transactions.
This finding, reported by Fortune and derived from the Crypto Information Sharing and Analysis Center (CryptoISAC), contradicts the perception that digital currencies are the go-to option for organized crime, including groups like Hamas.
Traditional Finance Systems May Launder Billions
The study, titled “Blockchain’s Role in Mitigating Illicit Finance,” was created with Robert Whitaker, the director of law enforcement affairs at Merkle Science, who previously worked as a supervisory special agent with the Department of Homeland Security.
Whitaker stated, “Cash will always be king due to its genuinely anonymous qualities,” emphasizing the challenges law enforcement faces in tracking cash as opposed to blockchain transactions.
Cryptocurrencies have been perceived as a hotspot for illegal activities, especially following notable events like the downfall of FTX and the Silk Road marketplace. However, insights from CryptoISAC and blockchain analytics firm Chainalysis indicate that this view could be misleading.
The report reveals that merely 0.34% of all on-chain cryptocurrency transactions were identified as potentially illegal in 2023, a drop from 0.42% in 2022. In contrast, mainstream financial systems (TradFi) are estimated to launder around 2% to 5% of global GDP each year, translating to $800 billion to $2 trillion.
Whitaker noted that cryptocurrency exchanges in the United States are bound by rigorous compliance protocols, including know-your-customer (KYC) and anti-money laundering (AML) laws.
These criteria ensure that blockchain transactions are easier to trace, which could deter criminals. “It’s friendly for law enforcement, as it has a public and immutable ledger,” he elaborated.
Calls for Customized Crypto Regulations
Furthermore, the report reveals that stablecoins, often assumed to be popular among crypto criminals for their steadiness, are infrequently used in illegal activities. From July 2021 to June 2024, only 0.61% of Tether’s USDT transactions and 0.22% of Circle’s USDC transactions were marked as potentially illicit.
The US Department of Treasury backs these conclusions, claiming in its 2024 money laundering risk assessment that “the utilization of virtual assets for laundering money is significantly lower than that of traditional currency.”
The need for global collaboration is underscored in the report to tackle national security risks, especially since a significant portion of illegal digital asset activities happens on offshore exchanges beyond US jurisdiction.
Whitaker calls for legislation that is specifically designed for cryptocurrencies, urging, “Stop trying to fit crypto, a round peg in a square hole known as fiat-currency regulations.” He emphasizes the importance of prompt regulatory measures in this fast-evolving space.
With rising national security concerns such as funding for terrorist organizations and evasion of sanctions, Whitaker stresses the critical need for decisive actions. “The longer we delay and overlook these issues, the more we allow wrongdoers to exploit this area,” he warns.
Featured image from DALL-E, chart from TradingView.com