Crypto Council For Innovation Report: Criminals Will Move Away From Bitcoin

A recent report published by the pro-cryptocurrency lobbying group Crypto Council For Innovation and co-authored by former CIA deputy director Michael Morell analyzed the degree of illicit activity associated with Bitcoin and concluded that criminals will decreasingly leverage bitcoin to launder money.

The report, titled “An Analysis Of Bitcoin’s Use In Illicit Finance,” noted the fact that Bitcoin is pseudonymous (as opposed to completely anonymous) as a reason that other cryptocurrencies that better protect user privacy represent a “far larger” percent of total transaction volume for illicit activities than bitcoin.

Furthermore, it highlighted the fact that fiat currencies are often better tools for obscuring criminal activity than bitcoin is.

“A currently serving official at the [Commodity Futures Trading Commission] added that it ‘is easier for law enforcement to trace illicit activity using Bitcoin than it is to trace cross-border illegal activity using traditional banking transactions, and far easier than cash transactions,’” according to the report.

And, Despite the fact that some regulators and news outlets have highlighted the potential for cryptocurrencies like bitcoin to be used as media for financing terrorism, this report found the contrary.

“On the key issue of terrorist financing, [a] former CIA terrorism expert was quoted as saying that ‘the hype is much greater than the reality and that cryptocurrency is not yet an important platform for terrorist organizations,’” per the report.

Finally, the authors of the report asked themselves the question: “In light of the conclusions we have reached, why do we see such alarmist statements and articles about the threat posed by Bitcoin?”

Firstly, the authors attributed these statements to a lack of understanding of the technology behind Bitcoin, the propensity for “bad” news to drive perception and the fact that “Bitcoin and its decentralized nature seem to pose a disruptive threat to traditional financial institutions.” 


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Stop The Bitcoin FUD: Criminal Cryptocurrency Transactions Are Falling

Despite a 2020 that saw the price of bitcoin rise to all-time highs and set new records for stability, it isn’t too difficult to find Bitcoin FUD being spread. But recently released blockchain analysis demonstrates that the “bitcoin is for criminals” narrative is weaker than ever.

The FUD Keeps Coming

Yesterday, Janet Yellen, the incoming nominee for U.S. treasury secretary, highlighted a common narrative that many believe shines an unfair light on the original cryptocurrency, suggesting that the government will try and regulate its use.

“I think many [cryptocurrencies] are used — at least in a transaction sense — mainly for illicit financing,” Yellen said. “And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn’t occur through those channels.”

Last week, European Central Bank President Christine Lagarde said that bitcoin is a “highly speculative asset which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”

Even some industry-focused publications have been spreading the “bitcoin is for criminals” FUD, without acknowledging the facts that criminals have been using fiat cash for much longer, that supposedly regulated financial institutions frequently facilitate major crimes, that anonymous cryptocurrencies would be much more useful for criminals than bitcoin or that there are many other arguments that suggest this narrative is unfair.

Cryptocurrency Is Leaving Criminals Behind

According to a summary of blockchain analysis firm Chainalysis’ “2021 Crypto Crime Report,” the proportion of cryptocurrency-related crime fell significantly last year.

“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or roughly $21.4 billion worth of transfers,” the firm found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $10.0 billion in transaction volume.”

See Also

Federal prosecutors have seized 69,730 ($1 billion worth) of bitcoin associated with darknet marketplace Silk Road. Here’s what we know so far.

To put it another way: Cryptocurrency transaction volume that Chainalysis could identify as “criminal” accounted for just 2.1 percent of all transactions in 2019 (though Yellen seems confident in saying that the technology is “mainly for illicit financing”), by far the highest proportion that Chainalysis has found since 2017. Across 2020, that figure was down to less than half of 1 percent, fueled in no small part by a sharp rise in overall economic activity.

Chainalysis did note that cryptocurrency-fueled ransomware activity grew 311 percent in 2020, compared to 2019, and that even this figure is probably low due to underreporting. But this still represented only 7 percent of the total funds received by criminal cryptocurrency addresses, which itself is a very small proportion of all cryptocurrency transactions across the year. Funds received through scams and darknet marketplaces were by far the leading categories for criminal transactions in 2020.

It may be unlikely that the picture painted by this report will significantly alter regulators’ opinions of Bitcoin, or eliminate the appeal of FUD-focused headlines and media coverage. But there is a clear story being told by Bitcoin’s 2020, even if it’s not the narrative everyone will adopt: BTC’s journey to global reserve currency status will always outpace its use on the fringes of the dark web.


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