My column in Bitcoin Magazine

Following tweets on the subject, I was invited to write the following column for Bitcoin Magazine. I think it’s important to explain DC goings-on to cryptonative audiences, so I accepted the invitation. I’ve republished the piece (with my original title, syntax, and conventions) below.

These are my independent thoughts and do not necessarily represent the views of my employer.

Bitcoin’s Paltry Use for Illicit Activity is now Indisputable

It’s time to take “illicit activity” off the FUD dice. Earlier this month, the US Treasury Department published reports that said, definitively, the use of bitcoin and other cryptocurrencies for illicit activity is far outstripped by the use of traditional assets. Critics can no longer credibly present the specter of illicit activity to beat back bitcoin; the foremost experts in the world say it is not a major threat.

The Treasury Department published three reports that identified key concerns for money laundering, terrorist financing, and weapons proliferation financing. Here’s what each said about the use of cryptocurrencies:

“(T)he use of virtual assets for money laundering remains far below that of fiat currency and more traditional methods.”

  • The 2022 National Money Laundering Risk Assessment, pg. 41

“(T)errorist use of virtual assets appears to remain limited when compared to other financial products and services.”

  • The 2022 National Terrorist Financing Risk Assessment, pg. 23

“There is no evidence that a proliferation network has used a virtual asset to procure a specific proliferation-sensitive good or technology…”

  • The 2022 National Proliferation Financing Risk Assessment, pg. 29

Case closed! Staff in the US Treasury Department, the authors of the report, are the most knowledgeable and best-equipped investigators and enforcers against illicit financing in the world. Moreover, the reports were reviewed by other US government partners, including the Department of Justice, the Department of Homeland Security, and the FBI. There could not be a more credible source to convey these findings.

Of course, Treasury’s reports confirm what industry participants have demonstrated for years. The most recent edition of the Crypto Crime Trends report published by blockchain analysis firm Chainalysis found that just 0.15% of cryptocurrency transaction volume in 2021 was used for illicit purposes. The recent arrest of the alleged Bitfinex hackers — and the simultaneous seizure of nearly 100,000 bitcoin — also demonstrates that moving large sums of money on a public network that can be monitored from a Raspberry Pi isn’t as easy as, well, pie.

But the reports also confirm what we know from common experience: that we use bitcoin far, far, far more frequently for storing wealth and sending money to family members and reducing emissions and making micropayments and fleeing the freaking Taliban than for illicit finance.

After this report, if you are a journalist or a policymaker or a pundit or even an anon on Twitter — it is now irresponsible and flat out wrong to say that crypto is a major vector for money laundering or terrorist financing. The top experts in the world disagree.

Not that they won’t try. The United State’s sanctions on Russia have seemingly generated copious opportunities for bitcoin haters to claim that bitcoin will be used to evade sanctions. All of this despite the release of the Treasury reports and live rebuttals from Treasury and White House officials that say everything is fine. Take this recent Politico article, “Russia’s hidden tool to undermine sanctions,” for instance. The sixth paragraph should lead the piece: “Treasury officials say they aren’t overly worried about crypto.” And really, the story could end there. But the piece accepts speculation from a pundit that cryptoassets like bitcoin could be used for sanctions evasion if they manage to bypass KYC processes. And if my mother had wheels she would have been a bike.

Fortunately, when the facts are on your side, you can put up a pretty good defense. Coin Center Twitter has been ground zero for fighting illicit finance FUD recently, with their staff pointing out that officials at FinCEN, the Treasury Department, the National Security Council, and the White House have all said that there’s no evidence that bitcoin is a threat to US sanctions. Their defense is a good example of how to counter speculation and fear-mongering: return to the facts about bitcoin’s use and to point out the real world examples of how bitcoin is empowering and protecting some of the most vulnerable people in the world.

The Path Forward

The three Treasury reports released this month also discuss the future risk that cryptoassets like bitcoin could pose to the US illicit finance regime. Examining risk is not a bad thing — I want my government to be aware of any risks posed by the proliferation of public blockchains, provided they also maintain a sober assessment of the benefits. For the US Treasury, that certainly seems to be the case. US legislators recognize the same thing; Representative Ritchie Torres (D — NY) said earlier this week, “you should never define any technology by its worst uses… there’s more to crypto than ransomware, just like there’s more to money than money laundering.”

Bitcoin is a global, neutral, and open monetary network. Anyone can use it, and that means sometimes parties we despise may use bitcoin alongside us. When that happens, the protection and promotion of the network — which is premised on freedom, equality, and self-agency — will still be worthwhile. The US Bill of Rights shows that extending freedoms to everyone is far better than constraining freedoms for everyone. Bitcoin’s growth will prove the same; I think it already does.

But the truth right now is that the parties we despise do not use bitcoin, at least as compared to traditional networks. The Treasury reports released earlier this month state this unequivocally. As we continue to fight for this internet freedom money, it will be essential to cite these highly credible sources as proof.

These are my independent thoughts and do not necessarily represent the views of my employer.



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Gyges Lydias

Gyges Lydias

Former Cantillon Insider. These are my independent thoughts and do not necessarily represent the views of my employer.