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The world of cryptocurrencies and the blockchain has exploded in recent years. However, the lack of understanding around this technology has given rise to a number of false beliefs and misconceptions, causing many people to approach digital assets with undue suspicion and uncertainty. To combat this, Binance has made it part of his mission to provide accessible Web3 education for all and to work to improve cryptographic understanding.
Through these efforts, Binance aims to debunk common misconceptions and promote greater crypto literacy. Its goal is to clear up the confusion and help improve the general public’s understanding of cryptocurrencies. It is crucial to have a deep understanding of the basics and to think critically, as this will help people better understand and ultimately use cryptocurrencies. It’s time to bust some crypto myths!
Myth: Cryptocurrencies are only used by criminals
The use of cryptocurrencies for illegal activities has been a matter of concern since the early days of this new form of digital currency. The public’s perception of cryptocurrencies as inherently linked to criminal activity (such as money laundering, drug trafficking, and cybercrime) can be traced largely to early media coverage around cryptocurrencies, specifically the infamous silk road market
Silk Road was an online black market that operated on the dark web from 2011 to 2013 and offered a platform for the anonymous buying and selling of illegal goods and services using Bitcoin. The market was known for its involvement in drug trafficking, and the association between crypto and Silk Road’s illicit activities contributed to crypto’s negative reputation in the mainstream media.
The perceived anonymity and decentralization of cryptocurrencies have led to concerns that they facilitate criminal activity. Many news outlets often choose to focus on high-profile cases of crypto-related crime, furthering the idea that digital assets are primarily used by those seeking to engage in illegal activity while avoiding detection.
Fact: Data Shows Cryptocurrencies Are Used Mostly by Regular People
The reality is that cryptography is mostly used by everyday people and exists as a legitimate tool for a variety of everyday transactions. Binance alone has more than 120 million registered users. As with any emerging (or existing) technology, criminals will always use it for nefarious purposes. That being said, illicit activity accounted for only ~0.15% of cryptocurrency transactions in 2021 (versus 0.62% in 2020 despite exponential industry growth) and money laundering accounted for 0.05%.
And don’t just take Binance’s word for it. These are data from chainanalysis, an independent blockchain analytics company. Chainalysis data is often used by government agencies, including the United States Federal Bureau of Investigation (FBI), the Drug Enforcement Agency (DEA), and the Internal Revenue Service Criminal Investigation (IRS CI), as well as such as the UK National Crime Agency (NCA), to investigate and combat crime related to cryptocurrencies.
In the traditional fiat space, between $800 billion and $2 trillion are laundered each year, representing about 2-5% of global GDP, as reported by the United Nations Office on Drugs and Crime (UNODC). Compare that to crypto, and the amount is a minuscule 0.03% of that. Criminals don’t like cryptocurrencies because the fact that transactions are publicly and permanently recorded actually enables researchers. Unlike traditional financial investigations, the transparent nature of cryptocurrencies makes it easy to identify bad actors.
Criminals don’t like transparency
Blockchain is inherently transparent. All transaction data is recorded in a public ledger. Anyone at any time can examine the entire codebase. The use of cryptography for nefarious purposes leaves an excellent paper trail for prosecutors to sign off on.
Europol and the Basel Institute for Governance have stated that cryptocurrencies are key to combating organized crime. You just can’t move large amounts of money without attracting attention. In fact, cryptocurrency exchanges remain one of the main allies in the fight against criminal activity. For example, in 2021, Binance helped remove a cybercriminal network laundering $500 million in ransomware attacks.
Law enforcement agencies continue to be the spearhead of the collective fight against crime. Acquiring the necessary resources, skills and tools, as well as partnering closely with crypto companies, has been a top priority for agencies globally. In the US, the Treasury Department has called for more funding to track and combat crypto crime, and the Justice Department and FBI have established national task forces dedicated to cryptocurrency enforcement.
In addition, the Financial Action Task Force (FATF), the global watchdog against money laundering and terrorist financing, has issued standards for virtual assets that mirror those of fiat. But implementation has lagged behind: of the 200 countries committed to the FATF standards, only 19 have implemented the one for virtual assets (as of March 2023).
final thoughts
The idea that cryptocurrencies are primarily a hotbed for illicit activities is greatly exaggerated. In fact, the vast majority of cryptocurrency transactions and investments are legitimate and focused on real-world use cases with the potential to transform the global economy. The rise of blockchain technology has opened up new opportunities for financial innovation, and cryptocurrencies are just one aspect of this rapidly evolving landscape.
From decentralized finance (DeFi) to non-fungible tokens (NFTs), the potential applications of crypto and blockchain technology are wide and varied. The industry has only scratched the surface of what is possible. While there are certainly risks and challenges, it is important to approach this exciting new technology with an open mind and a willingness to learn and adapt to fully realize its potential for positive impact. There must also be the right safeguards in place to try to weed out bad actors, something no financial services ecosystem is immune to.
Made: Crypto is mainly used by ordinary people. Independent data shows that only 0.15% of crypto transactions involve illicit activity. If you are a criminal, you are more likely to get caught using crypto than if you are using cash or the traditional financial system.
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