Why cryptocurrency is safe

CommunityFeb 18th 21
crypto is safe

Critics say criminals love crypto: but they love cash more

The invention of cryptocurrency has made money smarter than ever before.

Some people don’t always think that’s a good thing. Critics of cryptocurrency say that Bitcoin is the payment method of choice for criminals.

While this is a good way to stir up negative coverage and gain support in fiscally conservative circles, it is simply untrue. Cryptocurrency is sometimes used for illegal purposes, but it is eclipsed by the eternal currency of choice for criminals: Cash.

Cash is the ultimate anonymous payment method for illicit activity. The only way to trace cash is by tracking individual serial numbers on notes. Even then, there’s often no way to prove ownership. Cash is universally accepted and well-established methods for laundering the cash proceeds of crime exist. Contrary to what critics say, the same cannot be said for cryptocurrency.

Crypto is safer than ever

After the 2017 bull run, people learned more that Bitcoin could be used to pay for products online. Although online retail providers did not accept Bitcoin at the time, vendors selling illegal products online often did not have any reservation in regards to the new technology. People thought that cryptocurrency transactions were anonymous and that criminals taking part in this activity couldn’t be caught. But they were wrong.

Bitcoin is pseudonymous. This means that, while the participants and owners of transactions aren’t immediately identifiable, this data isn’t impossible to find out. Cryptocurrency transactions take place via the blockchain. Blockchains are digital ledgers and display record all information that passes through them, meaning that every Bitcoin transaction can be traced.

In the early days of cryptocurrency, criminals thought they could get away with their illegal activity simply by using cryptocurrency. Legislators and law enforcement were worried and didn’t understand the technology. But, in only a few years, everything has changed.

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Most cryptocurrency exchanges and wallets now have "Know Your Customer (KYC)" procedures to confirm the identities of customers. This makes it possible to know who is behind payments linked to criminal activity, as wallet addresses and transactions can be cross-examined, making it easier to catch people up to no good. Blockchain also enables the tracking of funds after they have left the customer’s wallet.

How are crypto criminals caught?

Bitcoin’s critics like to say that the cryptocurrency is the perfect tool for crime. In the early days, criminals probably said the same. But now that we know every Bitcoin transaction can be traced, from start to finish, it’s clear that anyone using the top cryptocurrency for illegal purposes is asking to get caught.

With most blockchain information displayed publicly, the technology is a huge help to law enforcement agencies. And they’re not the only organisations trying to clean up any bad actors in the industry. A whole new generation of blockchain monitoring companies are leaping into action as the cryptocurrency sector creates ever-improving best standard practices.

These companies use a combination of both blockchain experts and automatic processes to sweep for suspicious activity. When something gets flagged, blockchain monitoring companies share the information with exchanges.

But criminals aren’t caught out by high-tech trickery alone. Even if criminals think they’ve done everything possible to cover their tracks, they usually fall foul of an unavoidable mistake: human error.

The most common slip up is when criminals accidentally identify themselves. This can happen when something links the internet user’s real identity through their digital footprint. Other criminals take more care and no direct links to their name are exposed. But that’s not usually enough to protect them for long.

Humans are not as creative as they think and even the most random aliases can have identifiable components. Law enforcement officers are trained to look for patterns and have artificial intelligence on their side. Suddenly, the odds for criminals using cryptocurrency don’t look so good.

Cryptocurrency catches criminals. Cash can’t

The total volume of illicit activity involving cryptocurrency has grown in recent years, but it still accounts for less than 1% of all transactions. This statistic alone shows that cryptocurrency is shaking off any association with the proceeds of crime.

Linking cryptocurrency with crime is a lazy way for critics to try to give the industry a bad name. The blockchain analytics tools already in use by both private companies and governments make catching cyber criminals easy.

Next time you catch yourself thinking about Bitcoin and crime, look at the physical currency you have in your pocket and try to prove that it hasn’t been used in criminal activity in the last week. You might find yourself changing your mind quicker than you thought.

Bitwala works together with the industry's best AML providers combining progressive blockchain technology with machine learning and artificial intelligence.


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