“Crypto is for criminals on the black market,” they said

Ever since crypto was in diapers, people have been saying it’ll never amount to anything, and that it’s just for criminals and hackers.

It facilitates black markets like the Silk Road on the dark web, opens the door for crypto scams, and diverts money away from “legitimate” investments. But, now that Bitcoin is a teen and has its driver’s license and everything, is any of that turning out to be true or is it just a narrative that has been pushed by those who never cared to observe the reality of financial crimes?

One of the loudest outcries about crypto by skeptics is that it needs to be regulated to protect consumers and stop criminals from exploiting the currency loophole created by digital currency. Ha! That’s a pretty funny joke. Especially when fiat cash is one of the biggest facilitators of black market activity and money laundering. Let’s have a look at the real truth about the government’s competence when it comes to reducing crime.

Thanks, government

If you’ve ever watched a single movie about mobsters, cartels, white collar fraudsters, or any kind of criminals, you know one thing: cash is one of the best ways to hide your crimes. Cash is fungible. It’s untraceable, and relatively easy to launder. Pablo Escobar, El Chapo, and Al Capone all used cash to run their criminal operations. 

Black markets love cash too because transactions don’t leave a paper trail. But, how well has the government stopped this kind of activity? The proposed Financial Crimes Enforcement Network (FinCEN) budget for 2022 is $191 million. Meanwhile, it’s estimated that money laundering costs the world about 2%-5% of global GDP every year—that’s likely more than $1 trillion. And the majority of it is done in fiat. Good work, government!

Banks

Despite voices that decry crypto for enabling financial crimes, banks are some of the worst offenders. In 2020, US banks racked up a whopping $11.11 billion in fines, with the number one violation being failure to enforce AML standards. Some of the biggest financial scandals have involved banks like the infamous Wachovia fiasco in the 2000s. 

Cartels

Some of the most notorious perpetrators of financial crimes are cartels. There are lots of kinds of cartels, but the drug trade is the biggest baddie on the block. Cartels have never and likely will never stop money laundering and using black markets to conduct their illegal trade. Crypto doesn’t have a big impact on whether that happens.  

Black markets

Crypto is a great scapegoat for black markets around the world since it was created to be pseudonymous and untraceable. But decentralized money does not create black markets, regulation does. Generally speaking, black markets scale with government restrictions. In places like Cuba, for example, nearly all goods are pushed into the black market because of government control over commerce. The freer the market as a whole, the smaller the black markets become. 

Scary crypto dangers

But despite all the financial crimes perpetrated with fiat that run rampant under the government’s nose, everyone is scared of what they perceive as the vague and opaque world of the internet and cryptocurrency. Here’s an overview of some of the more

The dark web

If you want to send a shiver up a boomer’s spine, just mention the dark web. While you can explain that the deep web (most of the internet) is largely legal and useful data, one mention of the dark web will get people’s tongues clicking and their heads shaking. The dark web, apparently, is rife with hackers, evildoers, and scofflaws. Nevermind that information breaches on the bright web (cloud-stored data) can be even scarier than the obfuscated information accessed through a Tor browser.

Silk Road

Talk about Bitcoin any time before 2017 and you probably heard something about the ultra spooky Silk Road, a black market on the dark web that facilitated drug trade and all manner of unsavory and illicit activity. Fortunately, however, it was shut down a couple of years after its creation and criminals have had to resort to other ways of carrying out underhanded commerce.

Anonymous money (not!)

Another grenade launched at crypto by its skeptics is the fact that it’s pseudonymous and can be difficult to trace. Many casual observers of crypto think it’s completely anonymous and untraceable. That, of course, is not true. It can be more difficult to track than digital transactions on centralized ledgers, but it’s by no means anonymous. Plus, nowadays, more and more crypto platforms are complying with KYC-AML so that crypto investors can be thoroughly tracked…and taxed.

Hacks

The danger of hacking is another caution tossed out about crypto. This is certainly a real threat as many crypto hacks have lost people a lot of money. However, data breaches and digital financial crimes are just as big a threat for centralized institutions.

Crypto scams

There’s also a potential for run-of-the-mill crypto scams like rugpulls and phishing attacks. It’s definitely a good idea to keep security in mind when you’re dealing with crypto, but this is true for all information online. Data security is not taken nearly as seriously by the average person as it should be. 

Decentralization is a solution, not a problem

Crimes will always exist. It just depends on who is able to commit them. In the current financial system, it can be argued that the biggest perpetrators are banks and governments exploiting the masses for wealth they have not earned. But even if you’re on the side of some government oversight and regulation, decentralization has always aimed to improve security and transaction integrity.