"Understanding Cryptocurrency" begins with destigmatization! Industry should not be equated with crime

In recent months, several well-known cryptocurrency businesses and exchanges in Taiwan have faced enforcement actions from government agencies. Although many cases are still under investigation, the subsequent media reports have deepened the general public's negative impression of the blockchain industry and cryptocurrencies, even leading some 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.

The release of investigation data in recent years has helped to dispel the misconception that "cryptocurrency equals fraud," allowing the public to have a more accurate understanding of the current situation and facts regarding blockchain technology.

Is Cryptocurrency Equal to Crime? Data: Cryptocurrency Only Accounts for a Minority

In recent years, whenever news about "cryptocurrency crimes" appears in the media, it always attracts more attention and discussion, as the incessant scams through phone calls, text messages, or online fraud have become all too common. According to the United Nations' estimates on the scale of money laundering crimes, the global annual amount of money laundered internationally is estimated to be between 800 billion and 2 trillion US dollars, accounting for 2% to 5% of the global GDP.

For these unscrupulous individuals, any tool has the potential to be used for criminal activities, fraud, and money laundering.

That is to say, before the emergence of blockchain technology, there was already such a large scale of criminal activities in the world, with only a small fraction of criminals attempting to utilize new technological tools. According to the independent third-party company Chainalysis's report, in 2023, the total amount of funds hacked from cryptocurrency, as well as funds sent to illegal addresses, accounted for only 3% of global illicit money laundering activities.

Cryptocurrency Terrorist Financing Controversy: Chainalysis Warns Against Exaggeration and Misunderstanding

Over the six years from 2018 to 2023, the proportion of illicit activities in the total on-chain transactions has averaged less than 0.5%, dropping to 0.34% in 2023. In other words, cryptocurrency is not the preferred tool for criminals, and the data shows that its usage in criminal activities is far lower than traditional financial crime activities.

In fact, the transparency and traceability of cryptocurrency have been discussed by many as being more helpful in crime prevention, making it inherently unsuitable as a tool for criminal activities.

Similar conclusions can also be seen in another trusted blockchain data analysis company, TRM Labs, which in their report pointed out that fiat currency, especially the US dollar, still dominates illegal activities.

Cryptocurrency Crimes Exist! But There's No Reason to Throw the Baby Out with the Bathwater

Even though the percentage of cryptocurrency used in illicit activities is relatively small, it cannot be denied that it has indeed become a new medium for illegal activities. Not only money laundering scams, but also theft, illegal payments, and illicit business practices exist, just like in the traditional financial society, these long-standing criminal activities have also adopted "blockchain" technology and "cryptocurrency" as financial mediums.

However, just as people have not abandoned mediums and systems because criminals use cash and financial institutions for crimes, there is no reason to discriminate against or ban neutral inventions like "blockchain" and "cryptocurrency" due to a few bad actors.

The following image shows the illegal activities related to cryptocurrency compiled by TRM Labs

The development of the traditional financial system has gone through stages from simple fraud and theft to facing increasingly complex and transnational challenges in financial crimes. Over different periods, including early basic regulations, the beginning of international cooperation, new challenges brought by the internet and globalization, and modern methods to combat financial crimes using technological innovations. This includes gradually strengthening anti-money laundering measures, promoting international cooperation, addressing online scams and terrorist financing, and using financial technology and digital currencies for enhanced regulation and prevention.

In different eras, the world has brought about social progress with new developments. Currently, we are in an era led by technology, as the effective accelerationism of "e/acc" popularized in Silicon Valley states: "In the technological age, the forces of innovation and capitalism should be maximized to drive radical social change, even if it means completely overturning the current social order." They believe that overall, the eventual development will be more beneficial than harmful.

Learn more: What is Vitalik's proposal of "d/acc"? How does it differ from the effective accelerationism of "e/acc"?

Cryptocurrency Regulation is a Community-Driven Global Movement

It is undeniable that "blockchain" and "cryptocurrency" have brought about a global new financial market and business opportunities, driving various industries such as chip manufacturing, technological innovation, financial payments, art, entertainment, among others, onto new stages. In 2024, the U.S. Securities and Exchange Commission (SEC) approved Wall Street financial institutions to create "Bitcoin spot ETFs." As of March 2, a total of ten funds managed 61.7 billion US dollars in assets. The IBIT fund created by BlackRock entered the ranks of billion-dollar ETFs within a few months, showcasing the positive impact of cryptocurrency.

In order to promote the adoption of "blockchain" and "cryptocurrency," global cryptocurrency-related businesses and communities are closely monitoring regulatory developments. Many industry giants are willing to actively cooperate with regulatory or law enforcement agencies to prevent illegal activities and protect investors.

Successful Cases of "Cryptocurrency Crime Prevention" through Collaboration between Companies and Governments

In the practical operation of crime prevention, cooperation with governmental authorities or law enforcement agencies with public authority is crucial, with the world's largest cryptocurrency exchange Binance being the most representative.

• For example, as early as 2020, Binance launched the Anti-Ransomware - Bulletproof Exchanger Project, collaborating with the Ukrainian Cyber Police to arrest a large cybercriminal organization laundering over 42 million US dollars.
• Binance has also cooperated with units such as the Korean National Police Agency Cyber Bureau, U.S. law enforcement agencies, the Spanish Civil Guard, and the Swiss Federal Police to carry out international investigations, arresting the rampant cybercrime group FANCYCAT, involving 500 million US dollars in ransomware attacks, with the key being the enhanced internal anti-money laundering detection and analysis features augmented by Binance.
• Binance's investigation team also assisted U.S. authorities in freezing 440 million US dollars related to North Korean cybercrime organizations. In combating fraud activities, they collaborated with the Thai police and the U.S. Homeland Security Investigations (HSI) to crack down on the "pig slaughter" fraud case, seizing and intercepting over 27.7 million US dollars of illegal assets from more than 3,200 online fraud victims.

Companies Investing Significant Resources to Pave the Way for Mature Regulation

As the formulation of regulatory frameworks requires long-term planning and legislative processes, compared to the rapidly evolving landscape of financial technology, it often becomes urgent. Therefore, the initiative and proactiveness of private sector players are crucial to set standards and systems for the industry to prevent bad practices from driving out good practices and to pave the way for sustainable industry development in the future.

Companies Establishing Crime Prevention Investigation Teams

Taking Binance as an example, the company has established a leading financial crime compliance (FCC) unit in the industry to address emerging technological illicit activities. Their investigation team is composed of top investigators, blockchain analysts, and former law enforcement officers covering various professional fields such as technology, banking, law enforcement, and intelligence, with 75% of the members being former law enforcement officers, including backgrounds from the FBI, IRS, and the Department of the Treasury in the United States. Over the past two years, they have processed over 100,000 enforcement requests from global law enforcement agencies; in 2023, they completed over 51,600 suspicious activity reports (SARs).

New Technological Defense Weapons

To ensure staying ahead of criminal dynamics, some companies have blockchain analysis software in place, conduct intelligence gathering, data visualization, and analysis; at the same time, they continuously enhance the implementation of KYC (Know Your Customer) processes to meet regulatory requirements. For example, Binance is not only one of the first exchanges globally to implement mandatory KYC outside the United States but also continues to collaborate with leading KYC companies, blockchain tracking providers such as Chainlaysis, TRM Labs, and Elliptic, to ensure the security of their platform.

Public-Private Collaboration to Maintain Web3 Ecosystem Security Together

As a nascent technology and in its early stages of development, the rapid growth of cryptocurrency not only highlights the urgency of industry regulation and education but also underscores the importance of the industry being able to continuously demonstrate high standards to maintain the security of the Web3 environment. Security cannot rely solely on a single enterprise, but only when each industry participant puts in efforts at their respective positions can there be an opportunity to collectively drive the industry forward on the right path.

A Community-Driven Global Web3 Regulatory Movement

The global cryptocurrency community's positive contributions to this field are not only from businesses and government collaboration but also from white-hat hackers, cybersecurity companies, infrastructure operators, product developers, researchers, scholars, media, community influencers, etc., who through supervision, product development, standard setting, education, and other aspects, have gradually established a good usage environment for a wide range of blockchain users, moving towards the ideal of widespread adoption.

Start "Understanding Cryptocurrency" by Destigmatizing!

Looking back on nearly half a century of human technological history, when technologies such as telephones, mobile phones, and the internet emerged, they opened up different possibilities for society and greatly impacted various industries. However, in the information age driven by "traffic," we have lost the opportunity to neutrally view the development of technology. If we only understand blockchain and cryptocurrency through one-sided, sensational information, and stigmatize the industries and communities, they may be suppressed and pushed underground, further fueling the occurrence of illegal activities.

Therefore, when cryptocurrency is abused, society should consider whether we should abandon the potential contributions this technology can bring to human society because of a small number of malicious actors. Just as we do not abandon communication software when various scams flood social media platforms, or deny the convenience brought by online shopping due to buying counterfeit goods, we should strive to propose various solutions to help platforms become cleaner and safer, and the same applies to the blockchain field.

As an emerging technology and in its early development stages, the rapid growth of cryptocurrency not only highlights the urgency of industry regulation and education but also underscores the importance of the industry being able to continuously demonstrate high standards to maintain the security of the Web3 environment. Security cannot rely solely on a single enterprise, but only when each industry participant puts in efforts at their respective positions can there be an opportunity to collectively drive the industry forward on the right path.