Are cryptocurrencies used by criminals?

Cryptocurrency exchanges have long been the subject of controversy, mainly over issues related to anti-money laundering controls. However, Michael Morel, who was the executive director of the Central Intelligence Agency (CIA), recently published an independent report that directly disputes the widespread view of the alleged use of bitcoin by criminals. The report concludes that generalizations about the use of bitcoin in illicit financing have been significantly overestimated. Instead, the report states that the use of blockchain technology is a very effective tool in the fight against crime and intelligence gathering.

Research reveals that bitcoin and cryptocurrencies are not prevalent in illegal activities, as in fact, illegal activities in the bitcoin ecosystem are more likely to be more limited than in the traditional banking system. In particular, the proportion of illegal activities carried out through the traditional intermediaries of the financial system ranges between 2% to 4% of world GDP. On the contrary, according to the research, it turned out that the percentage of illegal transactions through cryptocurrencies is negligible, as it is less than 1%, while it is constantly decreasing.

The most interesting finding, in fact, is that the blockchain ecosystem through artificial intelligence allows us to identify offenders and their delinquent activity. Thus, in essence, it can be one of the most important tools of forensic investigation, in the effort made to combat illicit financing.

Where perhaps there should be a greater focus is on currency trading between cryptocurrencies and conventional currencies. The good news is that cryptos trading platforms are strictly regulated. Trading platforms follow strict rules designed to protect investors and avoid destabilizing the financial system. The rules require a high level of transparency and a guarantee of functional durability.

One problem, however, is that given their complex corporate structure, determining the regulatory status of trading platforms often proves difficult. The problem is the lack of a significant level of transaction regulation. The point is that cryptocurrency exchanges play a fundamental role in the overall encryption ecosystem. Therefore, the growing degree of entanglement between encryption funding and contract funding needs to be constantly evaluated.

However, regulators generally focus on combating money laundering (AML) and due diligence rather than transactions. In fact, cryptocurrencies are usually regulated for the purpose of money laundering and there are no broader framework governing trading activities. Given the lack of significant regulation of real trading activity, many cryptocurrency exchanges are likely to engage in questionable leverage and wash trading. What is needed is to become more and more those who will exercise any form of mitigation against market abuse, while the phenomenon of bargaining against customers must eliminated.

Cryptocurrencies are now a major asset class with a nominal value of trillions of dollars. There is now a greater willingness of large companies and financial institutions to offer cryptocurrency-related services.

But cryptocurrencies still do not have anyone really responsible for serious issues such as transfers of ownership and trade validation. Ultimately, regulated entities put themselves at significant risk at least until cryptocurrencies are subject to the same regulatory oversight as everyone else.