Common Crypto Myths Debunked!: The Myth of Crypto Being Inherently Unsafe
Main Takeaways
Skeptics often claim that the crypto and blockchain ecosystem isn’t safe or secure for regular people to use because it’s anonymous, untrustworthy, and widely used by criminal actors for their nefarious purposes. This is false.
In fact, the transparency of blockchain is a feature, not a bug. This new financial system is open to the scrutiny of users, regulators, and law enforcement across the globe – in many ways, even more so than the traditional financial system.
Trusted crypto services and platforms already have a comparable (and in some instances even higher) level of security and anti-money-laundering, know-your-customer, and transaction monitoring controls as traditional banks and other financial institutions.
With blockchain still a relatively new technology, there are many falsehoods and misconceptions around crypto. We take a look at some of the most common crypto FUD (fear, uncertainty, and doubt)-fuelling narratives and sort out fact from fiction.
Crypto’s naysayers like to argue that the digital-asset ecosystem isn’t safe or secure for people to use because it’s anonymous, untrustworthy, and widely used by criminals. The result is that many people who know little about crypto come to believe that the entire space is somehow inherently unsafe and that its primary usage is to enable unscrupulous actors to steal, defraud and launder funds. The radical version of this myth is that crypto is, in essence, lawless.
Not only is this narrative about the crypto industry unfair, but it is also misguided. The truth is that the vast majority of actors in the crypto space are law-abiding citizens and legitimate businesses that use digital assets as a means of conducting secure and efficient online value transfers. Responsible players in the space also maintain robust guardrails and security systems that ensure user safety.
However, due to the actions of a small minority of bad actors — and the amplification of those in the information space by people who propagate the crypto lawlessness myth — the entire industry is often unfairly painted with the same brush, resulting in unfortunate damage to its reputation. To stop these misrepresentations from hindering the ability of blockchain and Web3 to deliver on their massive promise, we as an industry must work to dispel the myth and demonstrate that there is nothing about crypto that makes it inherently unsafe.
How Widespread is Crime on the Blockchain?
Let’s start with the harsh reality, which is probably what helps feed this particular myth. Yes, hacks, fraud, and money laundering do take place in the crypto industry. It is not a space completely immune to bad actors and criminal activity.
Yes, you can always find news stories about digital funds stolen from individuals or platforms. But these figures say little without context, and examples are often excessively sensationalized.
Here are some hard numbers to put things into perspective. The 2024 Crypto Crime Report by blockchain analytics firm Chainalysis states that in 2023, criminal activity accounted for only 0.34% of all crypto transactions, which is a decline from the 0.42% reported in 2022. Yes, illicit crypto addresses received $24.2 billion last year, but this is insignificant compared to the approximately $800 billion of fiat currency (or around 5% of the world's GDP) laundered through the conventional financial system annually.
The truth is that illicit activity makes up a minuscule portion of the overall volume of transactions on the blockchain, and for a good reason: if you are a criminal, using crypto is just a very bad way to cover your tracks. The transparency of blockchain is a feature, not a bug. It ensures that this new financial system is open to the scrutiny of users and crime fighters across the globe – in contrast to traditional finance, where criminal activity can go undetected for decades.
Transparency as a Feature
As a general rule, permissionless blockchains make transactions public and traceable. This is unlike traditional, fiat-based payment systems where transactions are hidden from outsiders’ eyes and require a subpoena or court order to be revealed.
Think about it: a public blockchain ledger supervises, validates, and records each transaction's complete history. Every transaction leaves behind a permanent trail of unalterable records, making it easier for anyone to track the source and movement of funds. Law enforcement agencies fighting financial crime across the globe have already learned to take advantage of digital assets’ traceability when tracking ill-gotten funds.
Blockchain also enables money laundering risk analysis and reporting mechanisms, allowing for the overall system analysis rather than just monitoring entry and exit points.
Fraudulent gains in fiat currency can be hidden through the blending of funds, invoice fraud, or via offshore bank accounts, but the blockchain can be scrutinized at any moment by anyone using a block explorer.
All of this helps ensure greater ecosystem safety.
All Caught up on Compliance
Traditional financial institutions have had over a century to establish and refine processes and procedures for regulatory compliance, but the young cryptocurrency industry is catching up fast despite having been around for a little longer than a decade. In the first few years of its existence, there were certainly gaps when it came to the standard compliance practices of the financial world such as sanctions, anti-money-laundering, and identity verification systems.
Nowadays, leading crypto firms such as Binance maintain robust know-your-customer (KYC) and anti-money laundering (AML) systems and protocols to keep a close eye on suspicious actors and transactions and report them to the relevant authorities when needed. Such safeguards have become table stakes for serious digital-asset platforms.
Crypto exchanges can and do use the same high-caliber tools as major financial institutions to ensure that they are compliant with various jurisdictions’ anti-money-laundering and sanctions rules. As crypto reaches mainstream adoption, identity verification protocols have become a default for most crypto exchanges. Having a proper identity verification system in place helps minimize the possibility of bad actors using the platform for nefarious purposes.
Ensuring user security and complying with applicable rules are two key aspects of running a financial services ecosystem in a responsible way. Binance, along with many other crypto exchanges, does not allow anonymity to users. We have a strict identity verification policy that imposes a zero-tolerance approach to double registrations, concealed identities, and obscure sources of money.
We also go a step further to detect bad actors through proactive measures, and have a variety of tools in place to track and monitor activity on the blockchain to ensure that all transactions are legal and compliant.
Why The Myth of Lawlessness Is Harmful
In its early days, a number of high-profile news stories contributed to the crypto space becoming perceived as a “lawless frontier,” but the sector has progressed significantly since then. Leading cryptocurrency entities such as Binance understand that the sustainable expansion of the global Web3 ecosystem requires constant collaboration and communication with relevant regulatory authorities. This entails cooperating with law enforcement and using our expertise to assist them in identifying and pursuing those who try to exploit crypto for unlawful purposes.
We must work to debunk the fallacy that crypto is nothing but an insecure hub for illicit conduct. This is crucial for making lawmakers feel at ease while formulating unambiguous policies that safeguard customers while enabling innovation, and equally key for ensuring that new users are not discouraged from joining the Web3 movement because of misinformed perceptions. Both users and governments have a lot to gain from staying on the cutting edge of technological and financial innovation, which can bring jobs and increase the overall efficiency of the economy.
Fact: With the right regulatory frameworks in place, blockchain technology can offer superior safety and security compared to traditional finance. The false notion of rampant crypto crime needs to be drowned out by an evidence-based narrative of crypto’s security and regulatory compliance.