Despite a 2020 that saw the price of bitcoin rise to historic levels and set new stability records, it is not too difficult to find Bitcoin FUD spreading. But a recently launched blockchain analysis demonstrates that the “bitcoin is for criminals” narrative is weaker than ever.
The FUD keeps coming
Yesterday, Janet Yellen, the new nominee for U.S. Treasury secretary, highlighted a common narrative that many believe sheds an unfair light on the original cryptocurrency, suggesting that the government will try to regulate its use.
“I think that many [cryptocurrencies] they are used – at least in the transaction sense – mainly for illicit financing, ”said Yellen. “And I think we really need to look at ways to restrict their use and make sure that money laundering doesn’t happen through these channels.”
Last week, European Central Bank President Christine Lagarde said that bitcoin is a “highly speculative asset that has led to some funny and wholly damnable money laundering activities and activities”.
Even some industry-oriented publications have spread the FUD “bitcoin is for criminals”, without acknowledging the fact that criminals have been using fiat money for much longer, that supposedly regulated financial institutions often facilitate serious crimes, that anonymous cryptocurrencies would be very more useful to criminals than bitcoin or that there are many other arguments that suggest this narrative is unfair.
Cryptocurrency is leaving criminals behind
According to a summary of blockchain analytics firm Chainalysis’s “2021 Crypto Crime Report,” the proportion of cryptocurrency-related crimes has dropped significantly in the past year.
“In 2019, criminal activity accounted for 2.1% of the total volume of cryptocurrency transactions, or about $ 21.4 billion in transfers,” the company found. “In 2020, the criminal share of all cryptocurrency activities dropped to just 0.34%, or $ 10.0 billion in transaction volume.”
In other words: the volume of cryptocurrency transactions that Chainalysis could identify as “criminal” accounted for only 2.1 percent of all transactions in 2019 (although Yellen seems confident that the technology is “primarily for illicit financing”), by far the highest proportion that Chainalysis has found since 2017. In 2020, that number dropped to less than half of 1 percent, fueled in large part by a sharp increase in general economic activity.
Chainalysis noted that cryptocurrency-powered ransomware activity grew 311% in 2020, compared to 2019, and that even that number is likely to be low due to under-registration. But that still represented just 7 percent of the total funds received by criminal cryptocurrency addresses, which in itself is a very small proportion of all cryptocurrency transactions during the year. Funds received through scams and darknet markets were by far the main categories of criminal transactions in 2020.
It may be unlikely that the picture painted by this report will significantly change regulators’ views on Bitcoin or eliminate the appeal of FUD-focused headlines and media coverage. But there is a clear story being told by Bitcoin 2020, even if it is not the narrative that everyone will adopt: BTC’s journey to global reserve currency status will always surpass its use on the peripheries of the dark web.
