We’ve seen it before, and we’ll likely continue to see it for some time. Bitcoin and crypto just doesn’t seem to please everyone, and the latest doubter to be added to the mix is Federal Reserve governor Lael Brainard.
Brainard: Crypto Gives Rise to Illegal Activity
At a recent conference in Germany, Brainard explained to listeners that bitcoin was a haven for criminal activity, and that it had the power to inspire illicit events of every kind. Her words are allegedly based on various studies, and she stated:
One study estimated that more than a quarter of bitcoin users and roughly half of bitcoin transactions, for example, are associated with illegal activity. Only a third of the most popular exchanges require ID verification and proof of address to make a deposit or withdrawal. This is troubling, since a number of studies conclude that cryptocurrencies support a significant amount of illicit activity.
She further suggests that according to a January 2018 paper, crypto is one of the most unregulated markets on the planet, and that spikes in crypto-related crime are likely up due to the massive bull run that occurred in 2017, in which bitcoin jumped to nearly 20,000 in December of that year.
We estimate that around $76 billion of illegal activity per year involves bitcoin (46 percent of bitcoin transactions), which is close to the scale of the U.S. and European markets for illegal drugs.
Adding to these words, Brainard says that bitcoin is also transforming the black market into something that’s difficult to fully comprehend. Bitcoin and assorted privacy-focused cryptocurrencies like Monero are still widely used to purchase contraband on black market websites: anything ranging from guns to drug paraphernalia.
At the same time, there are other studies that show different results. One recently came from the London blockchain company Elliptic, which states that less than one percent of all dark web purchases are made with bitcoin and cryptocurrencies.
The bottom line is we don’t know who is correct, and we likely won’t know for some time. It appears many individuals have made up their minds about bitcoin based on what they think and feel, not on hardcore data, but with so many condescending reports meandering about, it’s hard to say whether the currency deserves the bad rap it’s getting from politicians and regulators, or if maybe authorities are just having a hard time accepting new trends.
However, it’s not possible to ignore everything that has occurred behind closed doors just because we like bitcoin’s properties. Enterprises such as the Silk Road market, for example, have come about as a means of selling illegal goods for bitcoin, so while the numbers may be exaggerated, it’s hard to believe that crypto doesn’t have any dark corners.