“Understanding Cryptocurrencies: Moving Towards Destigmatization! The Industry Should Not Be Equated with Crime”
In recent months, several well-known Taiwanese cryptocurrency dealers and exchanges have faced enforcement actions from government agencies. Although many of these cases are still under investigation, the subsequent media reports have deepened the negative impression of the blockchain industry and cryptocurrencies 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 significant information gap or bias. With the release of recent investigative data in recent years, it has helped 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 account for only a small percentage
Cryptocurrency crime exists! But there is no reason to abandon it
Cryptocurrency regulation is a community-driven global movement
Successful cases of “cryptocurrency crime prevention” through collaboration between enterprises and governments
Enterprises invest significant resources to pave the way for regulation
Enterprises form their own crime prevention investigation teams
New technology defense weapons
Public-private collaboration 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 scams through phone calls, text messages, or the internet have become all too common. According to the United Nations’ estimation of the scale of money laundering crimes, the amount of money laundered globally each year is estimated to be between 800 billion to 2 trillion US dollars, accounting for 2% to 5% of global GDP.
For these criminals, any tool has the potential to be used for crime, fraud, or money laundering. In other words, before the emergence of blockchain technology, there already existed such a large scale of criminal activities, and only a small portion of criminals attempted to use new technological tools. According to an independent report by Chainalysis, a third-party company, 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 illicit money laundering activities.
In the past six years from 2018 to 2023, the proportion of illegal activities has been consistently below 0.5% of the total on-chain transaction volume. In 2023, it dropped to 0.34%. In other words, cryptocurrencies are not the preferred tool for criminals, and the proportion is far lower than that of traditional financial crimes.
In fact, the transparency and traceability of cryptocurrencies have been discussed by many as helpful in crime prevention. It is not suitable to be used as a tool for crime. A similar conclusion can be drawn from another trusted blockchain data analysis company, TRM Labs, whose report pointed out that fiat currencies, especially the US dollar, still dominate illegal activities.
Although the proportion of cryptocurrencies used in illegal activities is relatively small, it cannot be denied that it has indeed become an emerging medium for illegal activities. Not only money laundering scams, but also theft, illegal payments, and illegal business activities exist. Just like the existing traditional financial society, these long-existing criminal activities have also adopted “blockchain” technology and financial media such as “cryptocurrencies”.
However, people have not abandoned the use of cash or financial institutions because they have been used for crimes by malicious individuals. Similarly, there is no reason to discriminate against or ban “blockchain” and “cryptocurrencies” after they have been widely adopted, targeting a small number of criminals.
The development of the traditional financial system has gone through different stages, from simple fraud and theft to increasingly complex and transnational challenges in financial crimes. Over the years, there have been various stages, including early basic regulation, the beginning of international cooperation, new challenges brought by the internet and globalization, and the use of technological innovations to combat financial crimes. This includes gradually strengthening anti-money laundering measures, promoting international cooperation, combating online fraud and terrorist financing, and using financial technology and digital currencies to enhance regulation and prevention.
In different eras, the world has brought social progress with new developments. We are currently in an era led by technology. As the “e/acc” (Effective Accelerationism) popular in Silicon Valley states, “In the technological era, the power of innovation and capitalism should be maximized to promote radical social change, even if it means completely overturning the current social order.” They believe that overall, the benefits of development will outweigh the disadvantages.
It is undeniable that “blockchain” and “cryptocurrencies” have brought a global new financial market and opportunities, driving diversified industries such as chip manufacturing, technological innovation, financial payments, art, and entertainment to a new stage. In 2024, the US Securities and Exchange Commission (SEC) approved the creation of “Bitcoin Spot ETFs” by Wall Street financial institutions. As of March 2, ten funds collectively manage $61.7 billion in assets, and the IBIT fund created by BlackRock has entered the list of billion-dollar ETFs in just a few months, demonstrating 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, and many industry giants are willing to actively cooperate with regulatory or law enforcement agencies to prevent illegal activities and protect investors.
In the practical operation of crime prevention, cooperation with government or law enforcement agencies with public authority is crucial, with Binance, the world’s largest cryptocurrency exchange, being the most representative example.
For example, as early as 2020, Binance launched the “Anti-Ransomware Bulletproof Exchanger Program” and cooperated with the Ukrainian Cyber Police to arrest a large-scale cybercrime organization with illegal funds exceeding $42 million.
Binance has also collaborated with units such as the Korean National Police Agency’s Cyber Bureau, US law enforcement agencies, the Spanish Civil Guard, and the Swiss Federal Police for international investigations, leading to the arrest of the rampant cybercrime group FANCYCAT involved in a $500 million ransomware attack. The key was the enhanced internal anti-money laundering detection and analysis functions developed by Binance.
The Binance investigation team also assisted US law enforcement agencies in freezing $4.4 million related to North Korean cybercrime organizations. In the fight against fraud, Binance collaborated with the Thai police and the US Homeland Security Investigations (HSI) to crack down on the “pig-killing scam,” seizing and intercepting more than $27.7 million in illegal assets from over 3,200 online fraud victims.
As the formulation of regulatory frameworks requires long-term planning and legislative procedures, it often falls short in comparison to the rapidly developing fintech landscape. Therefore, the proactiveness and initiative of private enterprises are crucial to establish standards and systems for the industry to prevent subpar practices and pave the way for sustainable development.
Taking Binance as an example, the company has established a leading Financial Crime Compliance (FCC) unit to deal with emerging technological illegal activities. Its investigation team consists of top investigators, blockchain analysts, and former law enforcement personnel, covering various professional fields such as technology, banking, law enforcement, and intelligence. 75% of the team members are former law enforcement personnel, including backgrounds from the Federal Bureau of Investigation (FBI), Internal Revenue Service (IRS), and the Treasury Department. Over the past two years, they have processed over 100,000 law enforcement requests from around the world 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 collection, data visualization, and analysis. At the same time, they continue to improve and implement Know Your Customer (KYC) processes to meet regulatory requirements. Taking Binance as an example, it was one of the first exchanges to implement mandatory KYC outside of the United States. It also continues to cooperate with leading KYC companies in the industry, blockchain tracking providers such as Chainlaysis, TRM Labs, and Elliptic, to ensure the security of its platform.
As a new technology in its early stages of development, the rapid development of cryptocurrencies highlights the urgency for industry regulation and education. It also underscores the importance of the industry’s ability to maintain high standards and contribute to the Web3 environment’s security. It cannot solely rely on a single company but requires the collective efforts of every industry participant to push the industry forward in the right direction.
The global cryptocurrency community’s positive contributions to this field are not limited to the collaboration between businesses and governments. It also includes white-hat hackers, cybersecurity companies, infrastructure operators, product developers, research scholars, media, and community opinion leaders. Through supervision, product development, standard-setting, education, and other aspects, they have gradually established a favorable usage environment for a wide range of blockchain users and moved towards widespread adoption.
Looking back at the technological history of mankind for nearly half a century, when technologies such as telephones, mobile phones, and the internet appeared, they opened up different possibilities for society and greatly influenced various industries. However, in the “traffic”-oriented information age, we have lost the opportunity to neutrally view technological development. If we only understand blockchain and cryptocurrencies through one-sided, sensational information, the stigmatized industry and community may be suppressed and pushed underground, further fueling illegal activities.
Therefore, when cryptocurrencies are abused, society should consider whether it should abandon the contributions that this technology can bring to human society because of a small number of malicious individuals. Just as we do not abandon communication software because of various scams on social media or dismiss online shopping because of buying counterfeit goods, we should strive to propose various solutions to help platforms become cleaner and safer. The same goes for the blockchain field.
As an emerging technology in its early stages of development, the rapid development of cryptocurrencies not only highlights the urgency for industry regulation and education but also underscores the importance of the industry’s ability to maintain high standards. The security of the Web3 environment cannot rely solely on a single company. Only when every industry participant exerts efforts in their respective positions will there be an opportunity to jointly promote the industry towards the right path.
Cryptocurrency
Binance
Stigmatization
Money laundering
Crime
Fraud
Prevention
