If you’re looking to launder money, your bank might be the perfect partner for you. While cryptocurrency has received a lot of attention for its potential use in criminal activities like money laundering, it turns out that the traditional banking system is actually used way more, than the dirty-thought crypto space.
According to a report by the United Nations Office on Drugs and Crime, around $1.6 trillion is laundered through the traditional banking system each year, compared to just $4.5 billion in cryptocurrency-related crime in 2019, according to CipherTrace. One might want to account for the fact that crypto transaction numbers are substantially lower than traditional means. Yet fiat currency is used in money laundering 800 times more than cryptocurrency. This means that the Crypto to Fiat laundering ratio is 1 to 800. It does seem like the effort to stop money laundering in web3 is not even worth the paper that the reports are printed on.
Furthermore, according to a report by Europol, money laundering schemes detected by law enforcement are still largely characterized by traditional techniques, particularly the use of cash. While the world is focused on the possible misuse of virtual currencies by criminals, the report shows that the real problem lies in old institutions.
So why is there so much focus on KYC (know-your-customer) and AML (anti-money laundering) regulations in the crypto space? The answer is not clear, but it seems that regulators are perhaps misplacing their priorities. It’s easy to hate crypto due to limited understanding in the public eye. But it’s not the way forward. Instead of condemning it or trying to make old regulation fit an involving space, regulators and companies should work together to define the new status quo. The UK is in a unique position to become the new crypto hub, and resume its old position as No1 in the world, but it needs to play its card right.
Demonizing crypto is not the way forward. The underlying blockchain technology, if anything, is an excellent tool against fraud. Transactions on a public blockchain are traceable, and even when criminals use tools like tornado cash to anonymize their transactions, law enforcement has still been able to identify and catch them. It seems unreasonable to focus so heavily on KYC and AML in the crypto space when traditional banking is still the primary means of money laundering.
It’s not that crypto is without flaws or that it hasn’t been used for illicit activities. But the scale of the problem is much smaller than many believe, and it’s important to approach these challenges with a balanced and nuanced perspective. The issue of money laundering is a complex one that requires a more holistic approach, one that takes into account the broader societal and economic factors that contribute to money laundering.
Rather, we should focus on finding real solutions to the problem of money laundering, and we should do so in a way that recognizes the potential benefits of blockchain technology. Only by taking a balanced approach can we hope to address this issue effectively.