Last week, the Justice Department announced criminal charges against Anatoly Legkodymov for violating anti-money laundering laws while operating Bitzlato, an off-shore crypto exchange alleged to have processed over $700 million in illicit funds over several years. Concurrently, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) ordered covered financial institutions to cease transacting with Bitzlato.
Like all financial instruments, crypto is used for crime, and this fact ought to be taken seriously. But blunt claims like Senator Elizabeth Warren’s (D‑MA) assertions that “crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers, and for rogue states that want to launder money” do not withstand scrutiny. Lawmakers’ response to crypto’s use in crime should not be based on the faulty premises that criminals primarily choose crypto and, relatedly, that crypto is primarily used for crime.
Exaggerating the connection between crypto and crime neither helps to efficiently allocate law enforcement resources nor gives due to the great majority of crypto activity that is legitimate. Inflating risks and ignoring benefits will not lead to sound policy.
Read the rest of this post →