Numerous governments are attempting to ban cryptocurrencies, with recent examples from China, India, Turkey and Nigeria. The reason for doing so is simple: The decentralized nature of cryptocurrencies poses a threat to the legacy financial system, and as the technology itself is still in its infancy, it seems to attract hackers. Even so, banning crypto will not dissuade hackers or scammers in the slightest.
Hackers remain drawn to cryptocurrency
Ever since the inception of cryptocurrency, hackers have shown an appetite for this form of money. The perceived appeal of being anonymous when receiving payments has created an aura of invincibility for all cryptocurrencies. However, that is often misunderstood, as none of the public blockchains are private nor anonymous in their current form. While transactions are pseudonymous on the blockchain, users will still need to convert to and from fiat currencies at some point. Those steps often require verifying one's identity through official documents, negating the entire anonymity and privacy aspect.
Even though most hackers acknowledge that cryptocurrencies lack both privacy and anonymity, the overall crime rates remain relatively high. Despite a significant decrease in crypto-related crimes in 2020, according to a report from security firm CipherTrace, there are still plenty of concerns. For this reason, many governments want to ban cryptocurrencies, as they expect such measures will deter hackers from doing harm.
That outcome seems rather unlikely, though. With tools such as ransomware, malware and other types of criminal activities, it wouldn't take much effort for hackers to change the way they receive payments. Cryptocurrencies offer pseudonymity, but they are not the only payment methods to do so.
These methods offer more privacy
Gift cards, for example, are a convenient, legal way of transferring value from one person to another. Most convenience stores sell gift cards for various services, including Netflix, iTunes, PaySafeCard and so forth. Every gift card has value and does not require a name to acquire or convert to online money. These cards are, in essence, far more private and anonymous than cryptocurrencies will ever be. However, they are also more accessible, making them a more significant problem to governments looking to dissuade hackers.
The same concept applies to prepaid cards for mobile providers. As these cards do not require identity verification to purchase and do not require a check to be activated, they are basically anonymous money. Although prepaid mobile cards aren't necessarily viable across borders, it remains a private way of transferring value from one person to the next.
If governments are serious about dissuading hackers, they will also need to find a way to cut them off from the existing financial system. Bank accounts and payment cards can be hacked and abused far too conveniently, even in 2021. Hackers and other criminals can access a bank account through various means, including mobile trojans, fake applications, phishing, keyloggers, man-in-the-middle attacks and so forth. As long as there is a way for hackers to make money without immediate repercussions, they will continue to explore the different options at their disposal.
Putting crypto’s ‘criminal role’ into perspective
While governments strongly believe Bitcoin (BTC) and other cryptocurrencies are the main reason for online crime, the reality is often different. According to a recent Chainalysis report, just 0.34% of the crypto market's combined transaction volume pertained to illicit activity in 2020. That is a sharp decrease from the 2% recorded in 2019. If anything, this research by Chainalysis shows fewer and fewer criminals focus on Bitcoin and other crypto assets.
Digging a bit deeper, it becomes apparent that ransomware remains the top solution for online crime, and it is a very significant threat and problem. As more people now work from home due to COVID-19 restrictions, there are new opportunities for criminals looking to make a quick buck. That doesn’t automatically mean that cryptocurrencies will be phased out, as the majority of consumers have no idea how this industry works.
Conclusion: A crypto ban isn’t the solution
Any government looking to ban cryptocurrencies will not be successful for multiple reasons. First of all, it is impossible to prevent people from using crypto assets, as governments have no control over these networks, nor are there any central figureheads or CEOs to pressure into shutting down activity, making it nearly impossible for governments to act. While regulators can make it difficult for service providers, those companies are not necessarily essential for sustaining cryptocurrencies.
Moreover, the numerous options that hackers and scammers have at their disposal to make money should not be ignored. If the goal is to prevent illicit activity, tackling the abuse of traditional finance needs to be the top priority. Cryptocurrencies represent far less of a market for criminals compared with bank-related services and products, as well as gift cards and other forms of pseudonymous money. Addressing cybercrime is a pressing matter as costs spiral further out of control, but the focus should not be on cryptocurrencies.
Any attempt to crack down on cryptocurrency “because criminals use it” is bogus. If that truly is the objective, there are different approaches to explore, rather than banning something. Since one cannot use cryptocurrencies without the traditional financial system, it is not hard to see where governments should focus their attention. Unfortunately, none of them seem willing to acknowledge that the system they help maintain is at fault for most criminal activity today.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.
Recommended Content
Editors’ Picks
Prisma price tanks 25% after nearly $9 million exploit
Prisma Finance (PRISMA) is being exploited, and the attacker has so far pulled $9 million in Ethereum from the borrowing protocol. Prisma asked vault owners to take the necessary steps to protect funds from the ongoing attack in an official tweet on X.
Meme coins gain traction after SEC’s partial win in Coinbase lawsuit: DOGE, SHIB, BRETT, POPCAT, BODEN
US SEC pocketed a partial win in its lawsuit against Coinbase, ushering a correction in crypto prices on Thursday. Despite the broad pullback, prices of meme coins like Dogecoin, Shiba Inu and Solana-based BRETT, POPCAT and BODEN increased.
Ondo moves $95 million worth of OUSG assets to BUIDL as tokenized fund attracts $245 million since debut
Ondo Finance (ONDO) announced on Wednesday that it's shifting about $95 million worth of its OUSG's underlying assets to the BlackRock USD Institutional Digital Liquidity Fund (BUIDL).
XRP price stuck below $0.65 resistance, Ripple lawsuit could suffer from Coinbase defeat
XRP price falls slightly to $0.61 on Thursday after its landmark programmatic sales ruling in July, which gave Ripple a partial victory against the US SEC, failed to reverberate in a similar legal battle between the regulator and crypto exchange Coinbase.
Bitcoin: BTC may have recovered, but is it out of the woods?
Bitcoin’s (BTC) upward momentum has shown a significant decline for the past two weeks or so. This development led to a bearish signal on the weekly and an uncertain outlook on the monthly.