Is US Official Crying Wolf? | Do Crypto Statistics Support Allegations of Increased Money Laundering?

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Crypto Stats

Like all financial instruments, crypto is used for crime, and this fact ought to be taken seriously. But blunt claims like Senator Elizabeth Warren’s (D‑MA) assertions that “crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers, and for rogue states that want to launder money” do not withstand scrutiny. Lawmakers’ response to crypto’s use in crime should not be based on the faulty premises that criminals primarily choose crypto and, relatedly, that crypto is primarily used for crime.

Exaggerating the connection between crypto and crime neither helps to efficiently allocate law enforcement resources nor gives due to the great majority of crypto activity that is legitimate. Inflating risks and ignoring benefits will not lead to sound policy.

Not only do claims that crypto is criminals’ preferred tool exaggerate the role of cryptocurrency in funding illegal activity, but they also ignore estimates both that the lion’s share of crypto activity is legitimate and that the legitimate share of crypto use is growing over time. The latest Chainalysis numbers estimate that transactions involving illicit addresses made up only 0.12 percent of the total cryptocurrency transaction volume in 2021 and 0.24 percent in 2022. (Interestingly, Chainalysis’s latest research has revised down 2021’s illicit transaction share number from 0.15 percent of total transaction volume.) Money laundering specifically was estimated to make up only 0.05 percent of total crypto transaction volume in 2021. Other assessments have gauged the share of illicit Bitcoin transactions at 0.1 percent to 5.1 percent in dollar‐​value terms (which the intergovernmental Financial Action Task Force has interpreted to likely be a floor). Even the high‐​end figures in the Review of Financial Studies article estimated that less than a quarter of the total dollar value of Bitcoin transactions through time was associated with illegal activity. And, while Chainalysis’s numbers for 2021 and 2022 indicate that illicit crypto transaction volume has been growing as an absolute number, the overall trend remains one where “crime as a share of all crypto activity is still trending downwards.”


A member of the U.S. Commodity Futures Trading Commission (CFTC) is reportedly calling for an end to anonymous crypto transactions in a push to curtail illicit activity.

According to a new Reuters report, CFTC commissioner Christy Goldsmith Romero says that tighter governmental and industry controls on digital assets are needed to curtail risks to national security.

During remarks at a City Week conference in London, Romero said that criminals are turning to crypto to fund cybercrimes.

Says Romero,

“Fraud is a hallmark of digital asset markets, the human toll of which may be overlooked. It’s essential for governments and particularly the industry to address that which makes crypto so attractive to illicit finance, and that is the allure of anonymity.”

Reuters notes how the US, citing national security concerns, recently banned currency mixer Tornado Cash, which pools together funds from differing sources, mixes them up and then redistributes them to increase anonymity.

US Congress is considering new laws to address anonymity in digital assets, according to Reuters.

Says Romero,

“It’s possible for all crypto companies to distance themselves from mixers and anonymity enhancing technology while still providing customers financial privacy.”

The Financial Stability Board (FSB) is also working on final global recommendations for regulations of crypto, which would be issued “soon,” according to Reuters.

The legacy financial system continues to lead the way when it comes to money laundering. According to a report published by the United Nations Office on Drugs and Crime, over a trillion dollars are illicitly funneled through the traditional banking system every 365 days.

A recent analysis from Forbes found that banking giants including Capital One and Deutsche Bank were fined a total of $2.7 billion in 2021 for committing anti-money laundering violations. As for the crypto industry, a January report from Chainalysis found that money laundering accounted for less than one percent of all crypto transactions in 2021.

Featured Image: Shutterstock/GrandeDuc

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