Crypto vs Banks, is Crypto as bad as everyone is making it out to be?

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11 months ago

I thought I would take a look at the often touted claim that crypto is just used by criminals. Let us see if the grass is greener on the other side.

Cryptocurrency and the bad apples

Sure, anyone who has been in crypto for more than 5 minutes has probably been approached by a scammer or two, at least. And I hope that no one actually believes that no crimes are being committed involving crypto. But more precisely what crimes are crypto used or connected to? Let us make a list.

  • Hacks or Frauds

  • Money laundering

  • Trading of illicit gods

  • Ransomware attacks

I hope I have not missed any obvious ones. If so please let me know and I will add it to the list.

Of those, I would say the most specific one, and unique to crypto is the ransomware attacks. They are increasingly becoming a problem. And most likely they would not exist, at least not to this extent, if it were not for crypto.

Tornado Cash

And probably the thing that is on most crypto people's minds is Tornado Cash. How its founder got arrested, not even sure if any charges have been pressed against him yet. And basically, all wallets associated with the site were shut down in the US. While this has been lifted to some degree now. It was still a major event.

And I covered it in a post earlier. And in there I said the following:

The image shows a pie chart of all the funds deposited into Tornado Cash since it opened its doors in 2019

The total volume of funds we are talking about is $7.6 Billions worth of Ethereum that have been deposited. And when we look at the data we can see that 10.5% of the funds deposited were stolen. And another 17.7% of the funds came from sources that were sanctioned. Chainalysis, however, makes a point of clarifying that almost all of this 17.7% of funds were deposited before any sanctions against those parties were in place.

In short, the vast majority of the money was not from illegal sources. And I would assume that that goes for the majority of all crypto as well. It is not connected to crimes or illegal activity.

Banks And what type of fruit can be found here

I would argue that one of the biggest reasons we have the banking system we have is power and tradition. Banks have had power for so long that we have gotten used to them having it, and basically having their own set of rules to play by.

And I would argue that one of the main proofs of this is the fact that even if we have illegal activity connected to banks. They are treated in a very different way than the way crypto is. 

If we take the case of Tornado Cash as an example. The Bank version of that I would argue would be what goes on in tax havens like Panama. And what happened when we got hard proof of the illegal activity of the super-rich? I am referring to the Panama Papers in case you're wondering. Did we freeze all accounts associated with Panama? Did we arrest the CEO of the Panama Lawfirm?

I guess you probably already know the answer to it. It has however led to some fines and back tax being paid. Which is good. But It has by far not stopped the super-rich from using this sort of setup to avoid tax and hide their money. And in case you were wondering how widespread this was. More than 360,000 people and businesses from 200 different nations across the globe were mentioned in the Panama Papers.

Danske Bank

And in 2018 it was revealed that Danske Bank, Danish Bank, was caught up in what appears to be a gigantic money laundering case. Their bank in Estonia was implicated by journalists having helped customers launder money. The Bank did its own investigation, where they looked at 6,200 customers that had the most risk factors. And in all the cases they found something suspect. And that is saying something. Their own investigations came to this conclusion.

The bank was accused of helping customers launder money over the years 2007-2015. And the amount you ask? It was to the tune of 200 billion Euros. But after this was revealed the governments acted swiftly, froze all accounts, and arrested everyone involved. What was that? I did not get you this time either. I thought I had you for sure. ;)

Need your money washed? Danske Bank will help you!

There have come a few legal cases from this, in a similar way as with the Panama Papers. The last numbers I saw were from 2020. Where a total of 10 criminal cases were filed involving $300 million dollars worth.

And shortly after this. It was found out that the Swedish bank Swedbank, also had its own share of bad customers they had helped in Estonia in a similar fashion. Al tho the amount of money where no way near 200 billion Euros.

And the astounding this is I am not even sure if that news made it outside of Europe. Not even sure it made it all the way across Europe for that matter. And what is more astounding is the fact that the customers were flagged by the banks as having several risk factors. In Danske Banks' case, they consisted of their 6,200 most risky customers in their Estonia office.

And as I said, a few slaps on the wrists. Danske Bank had to close its Estonia offices. I stink Swedbank did as well. But ultimately most of it was just filed under "business as usual".

The conclusion I can come to with this. Unfortunately that it appears that the crypto regulations appear to have some other reason behind them. Most likely their goal is to try and kill it off, so the banks and governments can keep their status quo. But of course, it might just be a case of "monkey see monkey do". Where the politicians keep seeing "crypto bad" or "X money in crypto stolen". And they are just reacting to that.

But it is pretty clear that if the governments want to have the biggest impact, in terms of $$$ the crypto space is just a tiny tiny problem. Teeny-tiny in comparison to the problem that is running wild in the banking sector. But of course, if we can get rid of the bad players in crypto it would be a great thing. No doubt there. And I am not trying to downplay the problems the hacks, scams, and the others make out. They are very much real.

What are your thoughts on this comparison? Have I made any bad assumptions or errors in my comparisons? Or am I oversimplifying a complex problem? Please let me know what you make out of all this. If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead.


See you on the interwebs!




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11 months ago