A new report by the Crypto Information Sharing and Analysis Center (CryptoISAC) has challenged the widely held belief that cryptocurrencies are a haven for illicit activities. The report, titled “Blockchain’s Role in Mitigating Illicit Finance,” found that criminals actually prefer to deal in cash.
Almost All Criminals Use Cash Instead of Crypto
In collaboration with Merkle Science, the report analyzed blockchain data and traditional financial systems to assess their susceptibility to criminal activity. The findings were surprising: while cryptocurrencies have often been associated with illegal activities, the data suggests that traditional financial systems may be more conducive to money laundering and other illicit activities.
Robert Whitaker, the director of law enforcement affairs at Merkle Science and a former supervisory special agent at the Department of Homeland Security, emphasized that cash remains the preferred tool for criminals due to its anonymity. “Cash will always be king because of its true anonymous nature,” he said.
Crypto exchanges in the United States, on the other hand, are subject to strict compliance regimes, including know-your-customer and anti-money-laundering rules, which make it easier to trace transactions on the blockchain. “It’s law-enforcement-friendly in the sense that it has an immutable ledger behind it that is public,” Whitaker explained.
The report revealed that an estimated 2% to 5% of the global GDP is laundered through traditional financial systems annually, while only a small fraction of crypto transactions are flagged as potentially illicit. Even stablecoins, which are often used by criminals to protect their ill-gotten gains from volatility, are rarely used for illicit purposes.
The U.S. Department of Treasury echoed these findings, stating that “the use of virtual assets for money laundering remains far below that of fiat currency.”
The CryptoISAC report also called for increased international cooperation to address the national security concerns posed by offshore crypto exchanges that are not subject to the same regulations as those in the United States. The report urged the Department of Justice to prosecute these cases and develop tailored legislative solutions to target the unique characteristics of cryptocurrencies.
Whitaker expressed hope that this report will help educate crypto skeptics and encourage policymakers to establish clear and comprehensive regulations for the industry. He warned that ignoring the issue could allow illicit actors to exploit the space for nefarious purposes.
