Is Cryptocurrency Only Helping Criminals?

There has been an ongoing debate about the significance of cryptocurrency since its rise in popularity about who it helps most and whether or not it is more of a benefit to criminals than ordinary citizens. 

The debate has caused a lot of people to pick a side when deciding their opinion regarding cryptocurrencies as a whole with people like Sam Bankman-Fried and Do Kwon causing the sides to tilt against the favor of pro-cryptocurrency advocates who believe that decentralization has the power to offer financial freedom to underserved communities. 

Crypto and its role in illicit activities

The debate first began with bitcoin’s use on the Silk Road, a website on the dark web that was shut down by the FBI in 2012. The website began as an anonymous marketplace for drugs and other illegal products with bitcoin as its primary currency and is often considered to be the first mass adoption of bitcoin. 

Following Silk Road’s demise was a string of hacks that targeted many altcoin networks such as Ethereum which caused the network to fork off into a new blockchain, violating a core principle of immutability as many transactions were reversed, showing that centralization would be an issue for web3.

However, the debate about the benefits of crypto reached a new high in 2017 when the Wannacry ransomware was unleashed across the world. The malware demanded victims pay a ransom fee in bitcoin or else the data on their computers would be completely erased. This moment marked a new exposure for bitcoin as it was revealed that the Wannacry ransom attack was being executed by a group in North Korea, suggesting that cryptocurrency was being used to benefit state-sponsored terrorism. 

Since then, North Korea’s hacker group Lazarus has been linked to a number of hacks related to cryptocurrency including the infamous Axie: Infinity hack which funneled millions out of the game and has been closely monitored by the U.S. Department of Justice. 

The most recent example of all has come from the war in Ukraine which has caused Russia to become heavily sanctioned by western nations. The sanctions immediately crippled the Russian economy, forcing many supporters of the war to turn to cryptocurrency as a way of keeping their finances stable. 

Who is decentralization helping?

Unfortunately, it has become clear that decentralization is a double-edged sword that can be easily used to cause harm, and it has. Situations like the war in Ukraine are reprehensible and there is no justification for what Russia is doing, and the ability to use cryptocurrencies as a way to circumnavigate sanctions placed on them is putting the web3 industry in a difficult spot because this is the first time crypto has been involved in a major war. 

Moreover, the ongoing string of hacks and illicit activity carried about by the likes of Lazarus and Bitzlato should be a greater cause for concern among crypto enthusiasts who might simply believe that stolen funds just “disappear,” but in fact are very likely going towards funding state-sponsored terrorism that can create major, disruptive harm if ignored.

Crypto's potential for good

All of this can’t be said without acknowledging that there are real benefits created by cryptocurrency that can help people who have no desire to create harm. In fact, crypto’s main purpose is to bring economic freedom to people that have little to no options available.

While most Americans might struggle to comprehend the issue, there are many countries around the world with poor banking options and fiat currencies that lose value consistently such as Zimbabwe’s 100 trillion dollar banknote and Venezuela’s hyperinflation. 

Citizens from these countries are the ones who can benefit the most from cryptocurrencies because it allows them to hold and maintain a net worth that won’t disappear overnight (assuming they are holding legitimate cryptocurrencies such as ethereum, bitcoin, or certain stablecoins like Dai). 

The balance of good and bad

Although many governments have begun addressing cryptocurrencies more seriously with upcoming regulations and frameworks developed by the United States and the EU, the dilemma of decentralization will still exist, causing problems that were unintended with bitcoin’s creation. 

Unfortunately, there is no easy answer to the question of how networks like bitcoin, which are completely decentralized, or Monero, which promotes itself as being highly private, can be adopted safely by a global user base. Instead, a new watchdog group might be necessary to monitor unusual transactions until a better solution is found.