In recent months, several well-known currency dealers and exchanges in Taiwan have faced enforcement actions from government agencies. Although many cases are still under investigation, the subsequent media reports have deepened the negative impression of the blockchain industry and cryptocurrencies (virtual assets) among the general public, even leading them to believe that they are tools specifically used for crime and fraud.
However, these stereotypes are actually based on a considerable level of information gap or bias. With the release of recent investigation data, it helps to clarify the misconception that “cryptocurrencies = fraud” and allows the public to have a more accurate understanding of the current situation and facts of blockchain technology.
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Cryptocurrencies = Crime? Data: Cryptocurrencies only account for a minority
Cryptocurrency crime exists! But there is no reason to throw the baby out with the bathwater
Cryptocurrency regulation is a community-driven global movement
Successful cases of “cryptocurrency crime prevention” through collaboration between companies and governments
Companies invest heavily in paving the way for mature regulation
Companies form their own crime prevention investigation teams
New technology defense weapons
Public-private cooperation to maintain the security of the Web3 ecosystem
Community-driven global Web3 regulatory movement
“Understanding Cryptocurrencies” starts with destigmatization!
In recent years, whenever news about “cryptocurrency crime” appears in the media, it always attracts more attention and discussion because various scams through phone calls, text messages, or the internet have become commonplace. According to the United Nations’ estimation of the scale of money laundering crimes, the amount of money laundered globally each year ranges from 800 billion to 2 trillion US dollars, accounting for 2% to 5% of the global GDP.
For these wrongdoers, any tool has the potential to be used for criminal activities, fraud, and money laundering. In other words, before the emergence of blockchain technology, there already existed such a huge amount of criminal activities, and only a small percentage of criminals attempted to use new technological tools. According to a report by independent third-party company Chainalysis, the total amount of funds stolen by hackers and sent to illegal addresses in the cryptocurrency market in 2023 accounted for only 3% of global illegal money laundering activities.
In the past six years from 2018 to 2023, the proportion of illegal activities in the total on-chain transactions has averaged less than 0.5%, and in 2023, it further decreased to 0.34%. This means that cryptocurrencies are not the preferred tool for criminals and their proportion of illegal activities is much lower than that of traditional financial crimes. In fact, the transparency and traceability of cryptocurrencies have been discussed as helpful for crime prevention, and they are not suitable as tools for criminal activities.
A similar conclusion can be seen in the report by TRM Labs, another trusted blockchain data analysis company, which pointed out that fiat currencies, especially the US dollar, actually dominate illegal activities.
Even though the proportion of cryptocurrencies used in illegal activities is relatively small, it cannot be denied that they have indeed become a new medium for unlawful activities. Not only money laundering scams, but also theft, illegal payments, and illegal business practices exist, just like the existing traditional financial society. These longstanding criminal activities have also adopted “blockchain” technology and financial mediums like “cryptocurrencies.”
However, people do not abandon cash and financial institutions because criminals use them for crimes. Similarly, there is no reason to discriminate against or ban “blockchain” and “cryptocurrencies” after they have been widely adopted, targeting only a few wrongdoers.
The development of the traditional financial system has gone through stages from simple fraud and theft to increasingly complex and transnational financial crimes. Throughout different stages, including early basic regulations, the beginning of international cooperation, new challenges brought by the internet and globalization, and the use of technological innovations to combat financial crimes, measures to strengthen anti-money laundering efforts, promote international cooperation, combat online fraud and terrorist financing, and strengthen regulation and prevention through financial technology and digital currencies have been gradually implemented from the early 20th century to the present.
In different eras, as the world develops with new advancements, it brings about social progress. We are currently in an era led by technology, as advocated by the Silicon Valley’s “e/acc” (effective accelerationism), which believes that in the technological age, the power of innovation and capitalism should be maximized to promote radical social change, even if it means completely disrupting the current social order. They believe that overall, the benefits outweigh the drawbacks.
There is no doubt that “blockchain” and “cryptocurrencies” have brought about a global new financial market and business opportunities, driving diverse industries such as chip manufacturing, technological innovation, financial payments, art, and entertainment to new stages. In 2024, the U.S. Securities and Exchange Commission (SEC) approved the creation of “Bitcoin Spot ETFs” by Wall Street financial institutions. As of March 2nd, ten funds managed a total of $61.7 billion in assets. The IBIT fund created by BlackRock entered the ranks of billion-dollar ETFs in just a few months, indicating the positive impact of cryptocurrencies.
In order to promote the adoption of “blockchain” and “cryptocurrencies,” global cryptocurrency-related businesses and communities are highly concerned about regulatory developments. Many industry giants are willing to actively cooperate with regulatory or law enforcement agencies to prevent unlawful activities and protect investors.
In the practice of crime prevention, it is crucial to cooperate with government or law enforcement agencies with public power. The most representative example is Binance, the world’s largest cryptocurrency exchange.
For example, as early as 2020, Binance launched the “Anti-Ransomware Bulletproof Exchange” program, which cooperated with the Ukrainian Cyberpolice to arrest a large-scale cybercrime organization that had illegally obtained over $42 million. Binance has also cooperated with the Korean National Police Agency Cyber Bureau, U.S. law enforcement agencies, the Spanish Civil Guard, and the Swiss Federal Police in international investigations to arrest the rampant cybercrime group FANCYCAT, which was involved in $500 million worth of ransomware attacks. The key was the enhanced internal anti-money laundering detection and analysis function provided by Binance.
The Binance investigation team also assisted U.S. law enforcement agencies in freezing $4.4 million related to North Korean cybercrime organizations. In combating fraud, Binance collaborated with the Thai police and the U.S. Homeland Security Investigations (HSI) to uncover the “Pig Killing” scam, seizing and intercepting over $27.7 million in illegal assets for more than 3,200 online fraud victims.
Due to the lengthy planning and legislative procedures required for the establishment of regulatory frameworks, compared to the rapidly evolving fintech landscape, the proactiveness and initiative of private companies become even more important to set standards and systems for the industry to prevent bad actors and pave the way for sustainable development in the future.
Taking Binance as an example, the company has established a leading Financial Crime Compliance (FCC) unit to address emerging technological illegal activities. Its investigation team consists of top investigators, blockchain analysts, and former law enforcement officers covering various professional fields such as technology, banking, law enforcement, and intelligence, with 75% of the members being former law enforcement officers, including backgrounds from the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and the Treasury Department. Over the past two years, they have handled over 100,000 enforcement requests from law enforcement agencies worldwide and completed over 51,600 suspicious activity reports (SARs) in 2023.
To keep up with the dynamics of criminals, some companies have blockchain analysis software and conduct intelligence gathering, data visualization, and analysis. At the same time, they continuously improve the implementation of Know Your Customer (KYC) processes to meet regulatory requirements. Taking Binance as an example, it is not only one of the world’s first exchanges to implement mandatory KYC outside of the United States but also continues to cooperate with leading KYC companies and blockchain tracking vendors, such as Chainalysis, TRM Labs, and Elliptic, to ensure the security of its platform.
As a new technology and an industry in its early stages of development, the rapid growth of cryptocurrencies highlights not only the urgency for industry regulation and education but also the importance of maintaining high standards to continuously demonstrate the industry’s ability to safeguard the security of the Web3 environment. This cannot be achieved by a single company alone, but only when every industry participant contributes to their respective roles, can there be an opportunity to collectively promote the industry towards the right path.
Cryptocurrencies
Binance
Stigmatization
Money laundering
Crime
Fraud
Prevention