Cryptocurrency is often associated with criminal activity, but this is mostly a myth, especially today. Bitcoin (BTC) and other cryptocurrencies don’t provide complete anonymity due to the Know-Your-Customer (KYC) policies implemented by most crypto exchanges. Even without KYC scanning, law enforcement agencies can easily track crypto transactions to identify criminal activity, as the blockchain is transparent and immutable.
In 2019, United States Treasury Secretary Steven Mnuchin said that Bitcoin was a national security issue, since it had been used for illicit activities. To him, cryptocurrencies were dominated by illegal activities and speculation. But the facts say otherwise.
Though illicit crypto volumes reached an all-time high at $20.6 billion in 2022 (primarily due to sanctioned entities), the share of all crypto activity linked with illegal activity was only 0.24%.
Source: Chainalysis
This pales in comparison to the $800 billion–$2 trillion laundered through traditional financial systems in fiat — about 2% to 5% of the global GDP.
One of blockchain’s defining features is its inherent transparency. All transactions are logged on a publicly accessible ledger, allowing anyone to view the entire codebase at any time. Utilizing cryptocurrencies for illicit activities leaves a clear trail of evidence that prosecutors can use to secure convictions. Europol and the Basel Institute on Governance have emphasized the importance of cryptocurrencies in combating organized crime. It is virtually impossible to transfer significant amounts of crypto without getting noticed.
Crypto exchanges share expertise and resources with law enforcement agencies
Contrary to popular belief, crypto exchanges continue to be one of the primary allies in the fight against criminal activity. For example, Binance, the world’s largest exchange by trading volume, has been very active in helping authorities in line with its mission to further security of the larger crypto ecosystem.
In 2022, the Binance Investigations team responded to over 47,000 law enforcement requests, with an average response time of three days, which is significantly faster than any traditional financial institution.
Binance has assisted many critical operations that brought down criminal groups operating with dozens to hundreds of millions of U.S. dollars. In 2021, the Binance Investigations team played a vital role in an international investigation with law enforcement agencies from Ukraine, South Korea, the U.S., Spain and Switzerland that dismantled a cybercriminal ring responsible for over $500 million in illict activity. The group, known as Fancycat, had been running multiple criminal activities, such as distributing cyberattacks, operating a high-risk exchanger, and laundering money from dark web operations and high-profile cyberattacks like Cl0p and Petya ransomware.
In most cases, crypto exchanges are not used in order to harbor criminals, but act as intermediaries for laundering stolen or otherwise ill-gotten profits.
Source: Binance
Besides sharing resources and being involved in cybercrime investigations, Binance is actively helping law enforcement staff with understanding how blockchain and cryptocurrencies operate and may be used in illicit activities. In September 2022, the crypto exchange formally launched its Global Law Enforcement Training Program, which includes individual and group training, workshops and other activities. The training program is led by a team of skilled professionals, including security experts and former law enforcement officers who participated in the crackdown on Silkroad and Hydra.
Binance is proactively building a more secure crypto ecocystem and working with law enforcement around the world to help detect financial and cybercrimes and assisting the prosecution of bad actors.
Law enforcement agencies remain the spearhead of the collective fight against crime. Acquiring the required resources, skills and tools to reduce illicit crypto activity is imperative, and crypto exchanges like Binance play a crucial role, thanks to their position.
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