Illicit Financing

Countering the Narrative: Comparing Illicit Activities in Crypto vs. US Dollars

The narrative that cryptocurrencies are primarily used for illicit activities often overlooks the role of traditional financial systems, such as the US dollar, in facilitating criminal conduct. This one-pager highlights key statistics that demonstrate the comparatively lower rate of illicit activities associated with cryptocurrencies compared to the US dollar and banks.

Illicit Crypto Transactions vs. Money Laundering in the Traditional Banking System

A report by Chainalysis shows that illicit activity represented only 0.15% of all cryptocurrency transactions in 2021, down from 2.1% in 2019 (Source: Chainalysis Crypto Crime Report 2022).

In contrast, the United Nations Office on Drugs and Crime (UNODC) estimates that between 2% and 5% of global GDP (approximately $1.6 to $4 trillion) is laundered through traditional financial systems each year, with the US dollar being the most widely used currency (Source: UNODC).

Terrorism Financing: Crypto vs. US Dollar

A 2020 study by the RAND Corporation found that terrorists have limited success in using cryptocurrencies for financing due to their lack of widespread adoption, traceability, and the volatility of these assets (Source: RAND Corporation).

Meanwhile, US dollars and other fiat currencies continue to be the primary funding source for terrorist organizations worldwide, often through cash smuggling, trade-based money laundering, and misusing the traditional banking system (Source: Financial Action Task Force).

Banks' Role in Facilitating Criminal Conduct

Over the past decade, major banks have been fined over $32 billion for their involvement in money laundering and facilitating financial crimes (Source: Finbold). Some notable examples include:

• HSBC: In 2012, HSBC was fined $1.9 billion for violations of US anti-money laundering (AML) regulations and for facilitating transactions with drug cartels and sanctioned countries (Source: Reuters).

• JPMorgan Chase: In 2020, JPMorgan Chase agreed to pay $920 million to resolve investigations related to market manipulation in the trading of metals futures and Treasury securities (Source: CNBC).

• Deutsche Bank: In 2017, Deutsche Bank was fined $630 million by US and UK authorities for failing to prevent $10 billion in suspicious transactions out of Russia (Source: BBC).

Cryptocurrencies, on the other hand, offer increased transparency and traceability due to their public and immutable nature, making it more challenging for criminals to hide their activities compared to traditional banking channels (Source: Elliptic). While cryptocurrencies can be used for illicit activities, it is important to note that regulatory bodies like OFAC are actively monitoring and enforcing compliance within the industry. Here are a few examples of crypto companies that faced penalties due to OFAC violations:

• BitPay: In 2021, BitPay, a payment processing provider for cryptocurrencies, agreed to pay $507,375 to settle potential civil liability for apparent violations of multiple sanctions programs. BitPay allowed individuals from sanctioned countries, such as Iran, Sudan, and Syria, to transact with merchants in the United States and elsewhere using digital currency (Source: U.S. Department of the Treasury).

• BitGo: In 2020, BitGo, a secure wallet provider for cryptocurrencies, settled with OFAC for $98,830 over 183 apparent violations of multiple sanctions programs. BitGo failed to prevent users in sanctioned jurisdictions, such as Crimea, Cuba, Iran, Sudan, and Syria, from using its non-custodial secure digital wallet management service (Source: U.S. Department of the Treasury).

By presenting these statistics, we aim to counter the narrative that cryptocurrencies are primarily used for illicit activities and highlight the need for a balanced perspective when comparing them to traditional financial systems, such as the US dollar and banks.