Bitcoin and Money Laundering
Bitcoin's reputation is that it is used by money launderers to wash their illicit gains. BUT in the global marketplace, "less than one percent of all transactions entering conversion services" fall under this 'dirty bitcoin' category.
The public opinion game is loud and in a constant struggle between some well financed players. The anti-crypto gang uses whatever information it can to sway public opinion against the movement and to support their pro-establishment agenda. The pro-cryptos do understand that the dark web was an early adopter and that it did provide methods for criminal activities over the years, however, the following report shows that cryptos are not the evil enablers which certain identities have lead you to believe.
The Foundation for Defense of Democracies’ (FDD) Center on Sanctions and Illicit Finance (CSIF) and the cryptocurrency analytics firm Elliptic have released a detailed report (see link below) about how the crypto exchanges, mixers, ATMs and gambling services have taken part in money laundering. The report tracks bitcoin movements between 2013 to 2016.
Only 0.61% of the money entering conversion services during the four years analyzed were verifably from illicit sources, with the highest proportion (1.07 %) seen in 2013.
Surprise, surprise more than 99% of all bitcoin movement is done by 'normal' people doing 'normal' things all over the world.
Less than 1% of the total transactions is by criminals who rely on exchanges (54%), mixers (18%) and gambling sites (20%) to launder their 'dirty bitcoins' back into FIAT.
Jurisdiction is also covered in the report. Notably, in the four years covered, it is shown that Asia has decreased its laundering share from 7% in 2013 down to 1% in 2016, meanwhile Europe has gained from 43% in 2013 to 57% in 2016. What needs to be explored further is that there were unknown jurisdictions providing 36% of total services in 2016.
The report concludes with recommendations to further improve AML on gambling sites, European exchanges and in developing countries in order to decrease the total circulation of 'dirty bitcoins'. Additionally, the report suggests that clients must be further warned about transacting on the dark web by increasing police presence on specific sites.
So what are the takeaways on all this . . .
At the end of 2016, bitcoin's market cap was 15.6 billion USD (CMC). If less than 1% was tainted, then it equates to 156 million USD at maximum and thus 0.0078% of the approximately 2 trillion of US Dollars laundered yearly by criminals (UNODC).
Should the evil 1% be allowed to continue their dealings and thus negatively dominate crypto's reputation? Of course not. But they are are counting on the fast growing market, misinformed public and disorganised governments to maintain the mess so they can just sit back and continue their criminal endeavours.
Since January 2017, the cryptocurrency market cap has exploded, multiple hacks have been reported, ransomware has struck internationally, scam ICOs have become commonplace and the opening of the futures market has brought even more investors looking for quick gains under the guise of crypto adoption. Irresponsible media continues to shout 'fire' and cause panic where none truly exists. Obviously, the dark net is a continuing source of funds coming into the exchanges, mixers and gambling sites but that percentage is falling too from 99% in 2013 down to 78% in 2016. And this is what is troubling.
Illicit funds are penetrating the 'normal' web and circulating more openly than previously recorded even with all the rules in place. Either internet companies are not complying with AML/KYC standards or those standards are not working in the real world. This further proves that more regulations are not the solution if 'good' individuals cannot make sense of them, if compliant exchanges cannot train employees fast enough to meet client demand or if criminals will simply discover ways around those regulations as quickly as they are implemented. The regulatory focus must change.
By establishing clear and logical tax guidelines, allowing full participation by eliminating prejudiced qualified investor programs, and by stopping the government/industry/banking backed FUD surrounding crypto users, the marketplace will continue to clean up the remaining 1% on its own. The majority of resources should thusly, be turned towards supporting the 99% of good crypto clients to stay clean rather than chasing the 1% of 'dirty bitcoin' launderers profiting from this regulatory mess of the current crypto marketplace.
Reposted with permission from: https://fyreum.org/2018/01/16/bitcoin-and-money-laundering/
Sources note: all statistics are from the following report unless indicated otherwise.
http://www.defenddemocracy.org/content/uploads/documents/MEMO_Bitcoin_Laundering.pdf