In the past decade, governments and financial institutions have locked horns over cryptocurrencies. Cryptocurrency stakeholders have been caught in the middle of the bull fight. The center of the debate is crypt-facilitated crime.
Cryptocurrency and Crimes
This crime was meant to be reduced with the introduction of new laws. Anti-Money Laundering and Know Your Customer policies were meant to reduce such crime. Despite the introduction of AML and KYC, cryptocurrency still became the center of attention in the fight against crime. Law makers claim that cryptocurrency is partially responsible to an increase in crime.
Lawmakers are right to some extent. Cryptocurrency can be accountable for an increase in crime. Looking back in time, one pattern can be made out. Criminals work for money, no matter what the currency is. Before crypto, criminals used fiat currency. Before fiat currencies, criminals committed crime for their own benefit. As the name implies, Cryptocurrency is a form of currency, it is expected that criminals will use it. Some might argue that crypto is used way more by criminals than other currencies. This might stand true, but it has simply to do with the lack of regulations due to its relatively new nature. The government is partially responsible for criminals switching to cryptocurrencies. The failure to regulate the technology gave them the anonymous nature required.
Cryptocurrency exchanges have always asserted their intentions are genuine. As it turns out, many exchanges play a huge role in fighting cryptocurrency related crime. Exchanges constantly look for suspicious transactions related to any sort of crime. Anything from money laundering to terrorist financing will result in a frozen account.
Unfortunately, governments and many financial institutions believe otherwise. The governments distrust in cryptocurrency is very obvious. This is ironic considering the public's distrust in our financial and banking structure.
This idea of the governments distrust in cryptocurrency was brought forward very recently. On the 29th of September, British firm RUSI published a report. The report talks about the risks associated with cryptocurrencies. The report focuses on compliance with regulations alongside all the risks. The report highlights the very divergent attitudes towards crypto.
The Survey Results
The study was intended to analyze the perspective different institutions have on cryptocurrency. Police departments, banks, financial institutions, law firms and more tool part in the survey. The results reported on the paper highlight very interesting findings.
The first interesting finding of the study involves only government agencies. Only 23% of all government agencies believe in the significance of virtual cryptocurrencies. The rest do not see any opportunities in the industry. This is also probably why most government institutions are disliked by many. If educated, any person can see the significance of cryptocurrency.
The paper also mentions that 89% of government organizations expressed concerns about crypto. All of the concerns are about the applications of crypto and its role in enabling the dark-web. These concerns are true and can be tackled with regulations. To reduce crypto enabled crime, much stricter regulations are required. This will make it almost impossible to sell or buy crypto without revealing your identity. These regulations will be harder to enforce than traditional currency since funds in cold wallets cannot be frozen.
Financial institutions believe that cryptocurrencies are the center of money laundering operations. Once again, these statistics are true. The only issue is that the reason they stand true, is the lack of regulations. If fiat currencies like the U.S. Dollar were not regulated criminals would use that instead.
When it comes to anti-cybercrime efforts, the study yielded some weird results. Only 9 percent of all financial institutions believed that crypto exchanges are willing to combat crime. This results come as most exchanges claim the exact opposite. This is true when it comes to most exchanges but is not true for most. Once again, if proper regulations were in place such exchanges could be shut down. The study also revealed that 48% of cryptocurrency holders expressed their confidence in the war on cyber-crime.
The study also revealed findings related to the transparent nature of blockchains. The report found that only 2 out of 10 financial institutions believed that crypto is transparent. This strongly conflicts with the claims that crypto specialists make. 8 out of 10 crypto specialists believe that cryptocurrency transactions are transparent.
The above study gives people a glimpse into the two possibilities. Unfortunately neither one of them looks very positive. One possibility is that cryptocurrencies are unhealthy for the financial world. The reason for this would be all the money laundering and crimes enabled by crypto. The other most likely scenario is that bank lack much needed knowledge when it comes to crypto.
The study clears a lot of doubt that currently surrounds cryptocurrencies. Specifically the part related to government trust in cryptocurrency. For a long time it was very unclear what the governments perspective on crypto is. Over the years, many believed that the government had an anti-crypto view.
While it make a lot of sense why governments are afraid of crypto, the reality was never clear. Some say that the lack of regulations is a government plan to kill cryptocurrencies. This theory makes some sense. This is considering that to this date, ongoing cyber-crime is hampering legitimate crypto efforts. Many believe that this is the reason the cryptocurrency revolution never happened.
Despite all the discouraging figures published, many see a good future ahead. These figures do not mean that cryptocurrencies will be dismissed. There is a legitimate future ahead for cryptocurrencies. The report noted that it appears most that took part in the study "agree to disagree".
As it turns out, 56% percent of the people that took part in the study confirmed something weird. Their decisions were centered around the governments believe on cryptocurrency. This might explain all the negativity facing cryptocurrencies.
The cryptocurrency scene is in a very messy state. The technology currently plays a big role in enabling crime. This is purely because of its initial anonymous nature. As blockchain tracking technology evolves and regulations improve, crime is expected to drop. Needless to say, criminals will always find new ways to do their trades. Just like before cryptocurrency, the criminals will find a form of currency to use when conducting their trades. The most likely scenario is the dark-web evolving and establishing its own economy. We do not see this happening any time soon but is a possibility in the future. Despite all that, it can be concluded that the crypto sector was messed up from the very beginning. This is the main reason most people have the wrong view about it.