Bitcoin is Not For Criminals

Despite the often ill informed reporting on Bitcoin, it is not the currency of choice for criminals


The prevailing notion that bitcoin is a haven for criminal activities is increasingly being challenged by data and developments in cryptocurrency and traditional financial sectors. This article aims to dissect these perceptions and present a more nuanced understanding of bitcoin's role in financial transactions, both legitimate and otherwise.

Traditional Banking: A Comparison of Compliance

In traditional banking, compliance issues have been prominent. For instance, National Westminster Bank PLC's 2021 fine of £264.8 million for anti-money laundering failures exemplifies the challenges in traditional finance. Such instances highlight issues of compliance and monitoring in legacy banking systems, contrasting with the situation in cryptocurrencies.

Chainalysis, a leading blockchain analytics firm, found that less than 1% of all cryptocurrency transactions from 2021 to 2023 were illicit. Within this small fraction, bitcoin's proportion was even lower, underscoring its relatively limited use in illegal activities compared to the broader cryptocurrency market. This figure contrasts sharply with the 2% to 5% of global GDP estimated by the United Nations Office on Drugs and Crime to be laundered annually through traditional finance channels.

The Dynamics of Financial Crime: A Shift from the Traditional

The post-2008 financial crisis era saw a strategic shift in how the U.S. Justice Department handled corporate financial crimes. Major institutions like Bank of America and Citigroup were more often subjected to civil rather than criminal charges, reflecting a nuanced approach to corporate accountability without destabilising the financial system. This context is crucial for understanding how bitcoin interacts with the wider financial world. Bitcoin, in particular, has often been linked to fraud and criminal activities. Still, these cases more frequently involve the intersection of bitcoin with traditional financial systems and human errors, rather than bitcoin itself. High-profile incidents involving crypto exchanges such as Mt. Gox and FTX showcase this interplay.

The Transparency of Bitcoin

Bitcoin operates on an open-source public blockchain ledger, offering a degree of transparency that is generally unsuitable for covert criminal activities. This was evident in the case of Heather Morgan and Ilya Lichtenstein, who were caught trying to launder $4.5 billion in stolen bitcoin, thanks to the traceable nature of their transactions. The seizure of bitcoin in Bulgaria from hackers in 2017 further demonstrates the cryptocurrency's traceability and its utility in law enforcement efforts against illegal actions. The Bulgarian Government's acquisition of a significant amount of bitcoin from this seizure is a case in point.

In a landmark action, the U.S. Attorney's Office seized $3.36 billion in cryptocurrency linked to the Silk Road dark web operation, showcasing the increasing regulatory and enforcement focus in the cryptocurrency domain.

Evolving Perceptions in the Financial Sector

The shift in perception is also reflected in the actions of major financial players. BlackRock, for instance, has transitioned from viewing bitcoin as a potential tool for money laundering in 2017 to filing for a Bitcoin Spot ETF in 2023 and referring to it as a ''flight to quality', recognising bitcoin as a digital counterpart to gold. Larry Fink of BlackRock, as reported by Fortune Magazine, acknowledges bitcoin's unique position as an international asset. Following the Bitcoin ETF approvals in the USA in January 2024 there is a constant influx of investment from the traditional finance sector, further underpinning the mainstream adoption of a once niche digital asset. The narrative of bitcoin as predominantly a tool for criminal activities is losing ground. The growing body of evidence, along with the evolving regulatory frameworks and changing perceptions among major financial entities, paints a picture of bitcoin as a currency with robust traceability features, making it less appealing for illicit use than often portrayed in media narratives. Bitcoin is emerging not as a sanctuary for criminality, but as a legitimate and innovative financial asset in the global economy, facilitating global peer-to-peer transactions and whilst still volatile, beginning to establish itself as a store of value against monetary debasement. It has changed very little from its inception in 2009, the real change is in the narrative attributed to bitcoin by market commentators as the global understanding of how it addresses significant shortcomings in the current economic and monetary systems finally catches up to to what some have known all along.