The debate surrounding illicit financial activities within the cryptocurrency space has been a contentious issue, with critics often pointing to the potential for misuse. However, recent remarks by Binance CEO Richard Teng and analysis by Dr. Andrzej Gwizdalski, a lecturer at the University of Western Australia, offer a new perspective.
Dr. Gwizdalski compiled data from the United Nations, World Economic Forum, and blockchain analytics firm Chainalysis to compare illicit activities in crypto and traditional fiat currencies. His findings present a stark contrast: while cryptocurrencies are often highlighted for their use in illegal activities, the volume is significantly lower than that in the traditional fiat system.
The United Nations Office of Drugs and Crime notes that the estimated amount of money laundered globally in a year is between 2-5% of global GDP, translating to $800 billion to $2 trillion. This is primarily through traditional fiat currencies. On the other hand, the World Economic Forum reports that corruption costs developing countries about $1.26 trillion annually, highlighting the scale of illegal activities in the traditional financial system.
In contrast, Chainalysis data revealed that the illicit use of cryptocurrencies reached a record $20.1 billion in 2022. This figure, while significant, pales in comparison to the estimates for fiat currencies. Importantly, the nature of blockchain technology means that transactions in cryptocurrencies are transparent and traceable, arguably making them a less attractive medium for illegal activities.
Richard Teng, CEO of Binance, echoed these sentiments. He emphasized the need to shift the narrative around crypto’s role in illicit activities, especially in light of such comparisons. Quoting Dr. Gwizdalski, Teng highlighted that traditional fiat, like the USD, is implicated in an estimated $3.2 trillion in illegal activities annually, over 100 times the amount linked to cryptocurrencies. He suggested a rethinking of the narrative, arguing that fiat currencies’ involvement in corruption and money laundering should not extend their reputation to cryptocurrencies.
The information compiled by Dr. Gwizdalski and echoed by Binance’s CEO calls for a reconsideration of the perspective on cryptocurrencies in the context of illicit financial activities. It suggests that while cryptocurrencies are not free from being used for illegal purposes, their scale and nature of misuse are significantly smaller compared to traditional fiat currencies. This insight is crucial for policymakers and the general public in understanding and regulating the crypto space.
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