Copy of Merkle Video Series Cover image – Gabriel Ryan (1920 × 1080 px)

Busting Myths #5 – “Crypto Is Used By Criminals”

by | Aug 7, 2022

Ryan McMillin from Merkle Tree Capital speaks with Gabriel Carey from Cadre Capital about crypto and whether is used by criminals.


Gabriel Carey:

I wanted to move on to crypto being used by criminals. Some people have indicated the only reason that cryptocurrency is being used at the moment is for criminal activities, either directly or through the dark web. What are your thoughts on this?

Ryan McMillin:

Great question. I love this myth. Crypto is actually a terrible choice for criminals. Most blockchains are public and completely traceable. Everybody, including enforcement agencies, like the FBI and Department of Justice can readily see which accounts have received elicit funds, and then attempt to track down their users, which they’re having increasing success with, recovering billions of dollars worth of crypto.

A great recent example is the Colonial Pipeline ransom where hackers extorted 75 Bitcoin from the gas pipeline owner. The FBI was able to recover the majority of this pretty quickly. Then we had the Infinix hack of 2016. The FBI arrested two people earlier this year and seized 3.6 billion of Bitcoin, ostensibly by tracking transactions associated with the accounts holding these assets.

We do have to acknowledge that, historically, crypto was popular with criminal enterprise via the dark web marketplace Silk Road. But this was around 2010, when law enforcement agencies were not trained and educated on blockchain technology. This is no doubt where the narrative comes from. But it’s now out of date and really should be retired. Cash in particular. US dollar will always be the preferred choice for criminal activity. It’s completely untraceable.

Research confirms elicit transaction volume in crypto continues to fall year on year and now represents about 0.15% of transaction volume. This compares to traditional finance where the accepted estimate is around two to 5% of global GDP. That’s about 14 billion for crypto and decreasing, versus two trillion for TradFi.