Crypto is now so mainstream that it is part of the 2024 election discourse. At a time when the political rhetoric surrounding this issue is becoming increasingly heated, it is important to keep in mind that more than 50 million Americans of all political stripes own crypto, and that is a natural bipartisan issue. Unfortunately, a vocal minority has continued to spread the false narrative that crypto’s primary use case is money laundering or illicit financing.
The reality is that crypto is a powerful tool for detecting and stopping criminals, which is why most criminals avoid using it. Recent estimates put blockchain illegal activity at approx 0.34% of all transactions. The vast majority of these illegal transactions take place offshore on unregulated or under-regulated exchanges.
Why do we hear so often about crime on the blockchain? It’s precisely because, unlike the $100 bills that are so popular with many criminals, crypto is easy to trace. The fact that we can easily identify and track illegal activities is proof that blockchain can actually help law enforcement. In contrast, cash crimes are reported less often because they are incredibly difficult to trace.
When it comes to facilitating criminal activity, cash remains unparalleled. Its untraceable and anonymous nature makes it the perfect tool for bad actors. In the United States alone, estimates suggest this is the case 33% of the cash in circulation is used by criminals and tax fraudsters.
According to data from the Department of FinanceLess than 0.5% of the estimated $2 trillion laundered annually worldwide is related to crypto. And that only applies to the laundered money that we are aware of, largely through the traditional financial system and not to cash.
Compare that to blockchain technology, which underlies all cryptocurrencies and provides law enforcement agencies with an unprecedented level of transparency. Every transaction is permanently recorded on a ledger, making it infinitely more traceable than cash. This transparency can be leveraged to detect and dismantle criminal networks at a speed unmatched by any other financial technology.
For example, our Global Intelligence team at Coinbase worked closely with the Metropolitan Police in London following a violent home invasion that forced a smart contract developer to hand over crypto to attackers. Blockchain analysis quickly tracked down the stolen funds, leading to an ongoing investigation into the perpetrators. This case illustrates how blockchain can turn the tide in favor of law enforcement.
Real victories in the fight against crime
Our collaboration with law enforcement agencies has led to significant victories. In April 2023, Hamas’s military wing, the Al-Qassam Brigades, stopped fundraising Bitcoin because it could be too easily traced by Israeli intelligence using blockchain analytics. Similarly, the Israeli government has seized $1.7 million worth of crypto from wallets linked to Hezbollah, thanks to tools from Chainalysis.
Coordinated efforts with Homeland Security also led to the identification and arrest of a key player in a phishing scam that targeted more than 1,000 Coinbase users, resulting in the recovery of $28.6 million. Each of these cases underlines a crucial point: crypto is not the enemy; it is a formidable ally in the fight against illegal activities.
The idea that cryptocurrency is synonymous with crime is a classic myth. Just like in the early days of the internet and telephones, new technologies are often met with skepticism and fear. But just as these technologies have become essential tools in modern life, cryptocurrency can also have a positive impact.
The transparency of cryptocurrency is ideally suited as a tool to stop criminal activities and not enable them. Unlike traditional financial systems, which are shrouded in secrecy by design, blockchain networks keep everyone honest. For example, recent joint exercises between Coinbase and law enforcement agencies quickly identified more than 1,450 potential victims across the ecosystem and traced millions of dollars in suspected illicit funds, demonstrating crypto’s potential in crime prevention.
All this underlines why it is time to put aside the stale narrative that crypto and crime are closely linked. This story amounts to an unfair categorization of a technology and industry that has so much to offer to individuals, governments, businesses and society as a whole.
The benefits of crypto include the ability to address inflation with built-in supply or circulation limits. Crypto is also faster than traditional money transfers and can provide financial autonomy to those without access to traditional infrastructure. Businesses can attract new customers and facilitate cross-border trade. Charities can easily check donations. And yes, law enforcement can easily detect illegal activities. The list goes on.
Let’s turn the page on this recurring myth of the links between crime and cryptocurrencies, and focus our energy on the real-world benefits. Let’s reduce our dependence on cash and embrace a financial future that works for everyone, worldwide.
Kristin Smith is an Army veteran and executive director of the Blockchain Association. The opinions expressed in Fortune.com commentary pieces are solely the opinions of their authors and do not necessarily reflect the opinions or beliefs of Fortune.
