As a seasoned crypto investor with years of navigating the digital asset landscape, I must say that this recent study comes as a breath of fresh air. For far too long, cryptocurrencies have been unfairly maligned as tools for illicit activities, a label that has hindered their potential to transform financial systems globally.
A recent study has found that despite the long-held belief that crypto assets facilitate criminal activity, perpetrators still overwhelmingly prefer cash for their illicit transactions.
According to a report released by Fortune, which draws its information from the Crypto Information Sharing and Analysis Center (CryptoISAC), this new finding contradicts the common belief that digital assets, like those used by groups such as Hamas, are preferred above all other options for criminal organizations.
TradFi Systems Estimated To Launder Up To $2 Trillion Annually
A research titled “The Impact of Blockchain on Preventing Illegal Financing” was jointly produced with Robert Whitaker, who serves as the head of law enforcement affairs at Merkle Science and previously held the position of Supervisory Special Agent at the Department of Homeland Security.
As Whitaker points out, “Cash maintains its dominance due to its inherent anonymity,” emphasizing the challenges that law enforcement encounters when attempting to trace cash transfers as opposed to those made via blockchain systems.
As a long-term crypto investor, I’ve often heard that the world of cryptocurrencies is synonymous with illicit activities, especially after high-profile events such as the fall of FTX and the Silk Road marketplace. However, recent data from CryptoISAC and blockchain analysis firm Chainalysis seems to challenge this perspective.
The report indicates that only 0.34% of total on-chain crypto transaction volumes were flagged as potentially illicit in 2023, a decrease from 0.42% in 2022. By contrast, traditional financial systems (TradFi) are estimated to launder between 2% and 5% of global GDP yearly, equivalent to between $800 billion and $2 trillion.
Whitaker pointed out that US crypto exchanges must adhere to strict compliance measures, including know-your-customer (KYC) and anti-money laundering (AML) regulations.
By establishing these conditions, tracking transactions within the blockchain becomes much more straightforward, effectively acting as a barrier against criminal activities. As he pointed out, its inherent feature of being an unalterable and transparent public record makes it beneficial for law enforcement purposes.
Whitaker Urges Tailored Regulations For Crypto
The report further emphasizes that while stablecoins like Tether’s USDT and Circle’s USDC are commonly perceived as preferred by crypto criminals because of their stability, they infrequently participate in illegal activities. In the period spanning from July 2021 to June 2024, only 0.61% and 0.22% of transactions involving these stablecoins were tagged as possibly illicit respectively.
According to the U.S. Department of the Treasury’s 2024 Money Laundering Risk Assessment, they believe that the practice of using virtual assets for money laundering is significantly less common compared to traditional, physical currencies.
The report also emphasized the need for international cooperation to combat national security threats, particularly since much illegal digital asset activity occurs on offshore exchanges outside US regulations.
Whitaker proposes legislation customized to fit the distinctive features of digital currencies, arguing that current regulations designed for traditional fiat currency are ill-suited. Essentially, he suggests that policymakers should stop trying to force a square peg (cryptocurrency) into a round hole (traditional regulation). Instead, he emphasizes the need for prompt and appropriate regulatory action in this field.
Regarding growing worries about matters like funding for terror groups and circumventing sanctions, Whitaker underscores the importance of tackling these difficulties head-on. He warns that delaying action only gives opportunities to unscrupulous entities to profit from this area.
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2024-10-03 15:12