Since cryptocurrency’s foray into mainstream media, several parallels have been drawn with respect to traditional finance and virtual assets. Those critical of the emerging industry continue to attack the space by claiming that crypto is a haven for money laundering. However, Binance has a different argument.
On Tuesday, Binance released a blog post explaining that the traditional financial market is far more susceptible to money-laundering schemes and illicit activities than crypto. For instance, a report from data tracker Chainlaysis showed that of all the cryptocurrency transactions made in 2021, only 0.15% were associated with some type of illicit activity.
On the other hand, the figure for far greater in traditional markets. The United Nations estimates that between 2% to 5% of traditional fiat (cash), or $800 billion to $2 trillion was associated with illicit activity in the same year.
Binance used the statistics to argue that crypto is not the haven for illicit money laundering that pundits claim it to be. In fact, the leading exchange said that crypto is an ‘awful vehicle for laundering money’ for a few reasons.
Binance sets up crypto VS traditional assets debate
For one, Binance claims that Know-Your-Customer (KYC) procedures are far more stringent in the crypto industry and it’s actually much easier to open a bank account with fake identification documents at a small local or regional bank.
Secondly, because of the decentralized aspect of crypto, one cannot simply move large sums of money into crypto without leaving a trace. Moreover, the trail of funds is trackable and those dubbed “privacy coins” (Monero, ZCash, Dash, among others) are much more transparent and easier to trace than traditional cash.
Lastly, law enforcement agencies can use the immutable and public nature of blockchain technology to catch illegal activities, something which isn’t available to regulators when cash transfers are made.
Hacks are on the rise but to what avail?
There seem to be some legs to Binance’s claim. For instance, several agencies took part in the investigation effort and actively tracked the stolen funds when the Wormhole bridge was exploited for over $320 Million. Although the preparator was yet to be identified, agencies have claimed that the stolen funds cannot be spent easily without arousing further suspicion.
Binance also pointed fingers at the Bitfinex hack that occurred in 2016. The stolen funds, worth $3.6 Billion, sat for years in a wallet before the culprits were captured when they attempted to cash out in February.
With crypto still in its early years, the space has a long way to go before overtaking the traditional finance market. However, until the virtual industry matures further, it’s important that baseless allegations don’t put a brake on adoption.