Despite 2020 that saw the price of bitcoin rise to all-time highs and set new records for stability, it is not too difficult to find Bitcoin FUD spread. But a recently released blockchain analysis shows that the “bitcoin for criminals” narrative is weaker than ever.
The FUD is Still Coming
Yesterday, Janet Yellen, the incoming nominee for U.S. treasury secretary, highlighted a common narrative that many believe throws an unfair light on the original cryptocurrency, suggesting the government will seek to regulate its use.
“I think a lot [cryptocurrencies] are used – at least in a transaction sense – primarily for illegal financing, ”said Yellen. “And I think we really need to explore ways in which we can reduce their use and make sure money laundering doesn’t happen through those channels.”
Last week, European Central Bank President Christine Lagarde said bitcoin is “a highly speculative asset that has carried out some funny business and some interesting and understandable money laundering activity.”
Even some industry-focused publications have been spreading the “bitcoin for criminals” FUD, not acknowledging the facts that criminals have been using fiat cash for much longer, often regulated financial institutions facilitates major crimes, that anonymous cryptocurrencies would be far more useful to criminals than bitcoin or that there are many other arguments that suggest this narrative is unfair.
Cryptocurrency Leaves Offenders
According to a summary of “Crypto Crime Report 2021,” blockchain analytics firm Chainalysis, the proportion of cryptocurrency-related crimes dropped significantly last year.
“In 2019, criminal activity represented 2.1 percent of all cryptocurrency transaction volume, or over $ 21.4 billion worth of transactions,” the company found. “In 2020, the criminal share of all cryptocurrency activity fell to just 0.34 percent, or $ 10.0 billion in transaction volume.”
To put it another way: The volume of cryptocurrency transactions that Chainalysis could identify as “criminal” accounted for only 2.1 percent of all transactions in 2019 (though Yellen seems confident in saying that the technology “Mainly for illegal funding”), by far the highest. a share that Chainalysis has found since 2017. Across 2020, that figure was down to less than half of 1 percent, largely fueled by a sharp rise in overall economic activity.
Chainalysis noted that cryptocurrency-driven ransomware activity grew 311 percent in 2020, compared to 2019, and that this figure was even probably low due to underreporting. But this still represented only 7 percent of the total amount of money received from criminal cryptocurrency addresses, which itself is a very small proportion of all cryptocurrency transactions over the year. Money received through scams and darknet markets were by far the main categories for criminal transactions in 2020.
It may be unlikely that the picture painted by this report significantly changes regulators’ views of Bitcoin, or eliminates the appeal of FUD-focused headlines and media coverage. But a clear story is being told by 2020 Bitcoin, even if that’s not the narrative everyone will adopt: BTC’s journey to global reserve status will always outweigh its use on the periphery of the dark web.