Here we go again.
The Colonial Pipeline attack involved a ransom paid in crypto, so the usual suspects are on the attack. If you are an investor or business leader who has contemplated adopting bitcoin, you have already been bombarded with negative news headlines and internal emails telling you why this latest development is important.
To save you the trouble of having to read them, I’ve prepared a summary:
A serious crime has been committed, and cryptocurrency was involved. Yada yada yada, bitcoin bad.
Someone Really Smart
Needless to say, their analysis is correct. A crime has been committed, and the crooks used crypto. I’m sure the articles you’ve been sent say a lot more, but the rest is likely filler. Crypto was used by criminals, yada yada yada, crypto bad.
I could write an entire book refuting this conclusion. But I won’t. I’ll just leave you with some fun facts about money and payments:
Fraudulent activity involving plastic cards reached $27b in 2018, doubling what they were just five years earlier. The numbers have gone up since.
There is a specific type of wire fraud that uses scam emails. According to the FBI, over $25b was stolen in a 3 year span using this method alone.
Hackers once used SWIFT messaging to steal over $100m from the Federal Reserve Bank of New York. Most of the money was never recovered, despite being sent through the regulated banking system.
Back when people wrote checks, check fraud was fairly common. There’s a great movie starring Tom Hanks and Leonardo DiCaprio about this. (I highly recommend it!)
The Colonial Pipeline hack involved a ransom payment of $5m. The Bitcoin blockchain has been settling over $10b per day in the month of May. The ransom payment represented .05% of one day’s volume.
There is over 2 trillion dollars worth of physical bills in circulation. Harvard Professor Ken Rogoff — whose analysis has been applauded by the likes of Ben Bernanke — estimates that a third of that cash is involved in drug deals or tax evasion.
That’s over $600b in illicit activity, or the annual GDP of Switzerland.
The Blockchain intelligence firm Chainalysis estimates that the percentage of Bitcoin that was involved in illicit activity in 2020 was also one third — but one third of one percent.
That’s only $10b
Global financial institutions paid more than $10b in money laundering related fines in 2020 alone.
The U.N. estimates that $1.6 trillion per year is involved in money laundering.
That’s more than double the total value of all Bitcoins in existence.
In conclusion: crypto is definitely used in criminal activity. Yada yada yada, so is everything else