Crytocurrencies and illegal activities

Are Cryptocurrencies Like Bitcoin Helping Fund Illegal Activities?

The story of pizza


Before moving to cryptocurrencies and the underlying illegal activities let’s enjoy a story. I gurantee you, it is not out of context.

There is a theory that one of the most savored food pizzas was introduced to the United States by money laundering. During the late 19th century, the mafia community in Italy had dominant power in society, but they never messed with the police. But in an incident, one mafia family killed a bunch of policemen mistakenly in a bomb blast when they tried to kill a rival mafia family. After the incident, the police department started hunting down the mafia communities.

Italian Mafia and illegal activities

To survive the calamity many members flocked to the United States with the money earned through various illicit activities. To convert their black money to white they started to open pizza shops at several corners throughout the USA. Gradually pizzas gained popularity in the whole United States. They used to show sales that were much higher than the actual sales that were taking place.

Many of these cases were tracked down later as anyways their money has to pass through regulated banks. Government officials grew suspicious with the time and red-listed many such businesses.
Now you may ask why you are going through this story. This story is only to show what money laundering is. It is the process of converting dirty money into legal money. Though most governments have strict regulations on money laundering. But how it links to our case of cryptocurrencies?

There is no governing body like in the case of pizza mafia story in the transaction of cryptocurrencies. Anyone can perform transaction without revealing his identity.

Recently, as cryptocurrencies are taking the world of finances by a boom many financial experts, including Warren Buffet, believe that cryptos are good for nothing. Now let’s try to see what might be the possible reasons.

Cryptocurrencies and illegal activities

Cryptocurrencies and illegal activities
Image credit: Crypto potato

In 2019, Sean Foley and Jonathan R. Karlsen published a research paper where they stated that approximately 46% of bitcoin transactions are illegal. Further, this is seen to be close to the scale of the U.S. and European markets for illegal drugs. But is money laundering the only form of illegal activity? No there are others:

But why do criminals prefer cryptocurrencies to boost illegal activities?

There are several reasons, but mostly it is due to the various promising advantages cryptos bring along. Let’s see a few:


Though all the transactions on blockchains are available to anyone for assessment, the real identities of transaction makers remain unknown. This way criminals can remain anonymous and can resort to trading drugs, explosives, child pornography, etc.

Easy storage and transaction

Transaction of cryptocurrencies doesn’t require any physical space and, also, they can easily be transferred over the borders. Thus it becomes easy for criminals to both steal and launders money easily.

No third party

Cryptocurrencies promise easy peer-to-peer transfer, with no acquaintance between the parties. There are no such middlemen. As much as we as common people take advantage of this, criminal minds are not lagging behind.

Easily accessible and high speeds

Cryptocurrency transactions ensure easy transfer of funds from one device to another. As there is no central regulatory body or third party, it takes little time to complete one transaction. Thus the criminal activities are in bulk as reported by some news authorities.

Since there are no links between a cryptocurrency address and the person behind it, it becomes a very difficult task for the government bodies to track down these unlawful activities.

But there are some recent developments. Firms like Cognyte are bringing tools that can help to de-anonymize and reveal illicit transactions made by criminals. We still need to see how things unfold in the coming few years.

But how exactly is it true about cryptocurrency’s hand in illegal activities

Sean Foley and Jonathan R. Karlsen may claim that cryptocurrencies pose a threat to security but the research dates back to 2016. A lot has changed after that in 5 years. The government may not regulate the channel but they are keeping a keen eye on various developments. Also, we might be seeing multiple regulations on the transactions of cryptocurrencies in the coming few years.

According to a report by Chainalysis 2019, criminal activity represented only 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, this fell to just 0.34% ($10.0 billion in transaction volume).

As the YouTuber Till Mushoff says, there is a better instrument for money laundering and they are called banks. Still, the most unlawful transaction is indeed done through banks as it has been done for centuries. It might be a better idea if the government takes necessary steps to improve the traditional banking systems too.

Blockchain technology and its underlying application in the form of cryptocurrencies are still in the infant stage. We are yet to see some developments in the coming days. As blockchain network may provide you personal security but it may take way social security in the long run. But attempts are being made to minimize such activities as much as possible.

Crypto transactions are getting a lot of attention and governments all around the world are planning to bring more legislation in the scenario. The digital world is buzzing with terms like decentralization but it will take some time to implement the underlying system. In the end, the security of society as a whole is the prime concern.

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