It is safe to say that cryptocurrency has given the world a new economic alternative, more private, more individual, and much safer. Proving itself to help amid social crisis through blockchain crowdfunding, giving anonymity to the users and guarding them against governmental sanctions but still giving them the chance to participate in helping others, an excellent example being the Ukrainian government posting several crypto wallets where they have received monetary aid at the beginning of the year to face the Russian invasion — raising $10 Million by February.
Although those are surely good news, brightening cryptocurrency’s image in the public eye, it is not a secret that there have been acts of felonious acts linked to cryptocurrencies — to the point where those most unfamiliar or reluctant to join the community think of it as the main reason cryptocurrencies exist, to be the new alternative for criminals to do their shady businesses without leaving a track and avoiding all authorities in the process. According to a news report released back in January of this year, crypto crimes reached an all-time high of $14 Billion, $7.8 Billion higher than 2020 — a huge amount indeed, similar to the Gross Domestic Income of countries like Georgia and Madagascar.
Cryptocurrency’s anonymity and intractability allow this to happen, a person could create several wallets from which they could perform several transactions. No need to go through a meticulous registration process that requires identity verification or exact address location --- or at least that’s what most people think. In reality, cryptocurrencies like us here in MintMe, Bitcoin, and Ethereum all can be traced and identified easily in the transactions history--- you just use a pseudonym for them.
Is it actually anonymous?
Back when cryptocurrency was just in its first boom, the idea of them starting to become regulated was completely out of question. Was part of its appeal the fact that it was completely free of government regulation and “anonymous”, giving a sense of full security and control of their money which was much needed after the 2008-2009 economic crisis. That was until big crypto frauds and Ponzi schemes like OneCoin started to snatch lifetime savings of users, which sparked the conversation and calls for a way to secure situations like these never happen again.
As of today, governmental regulations per se are still controversial and looked down upon, regulations are much more common. As some must know, blockchain transactions are not completely anonymous --- they are all associated with a series of numbers and letters that represent the wallet sending the assets, the wallet receiving them, and the other aspects like the fees that had to be paid, number of the transaction, and such. Most importantly, those wallets can be identified, and although their owners may be perceived as totally unknown it has become a standard for exchanges platforms to require all of the wallet owners to submit their legal identity verification, thus allowing authorities ---or at least the sites’ authorities--- to have in hand the users’ real identities and linking them to their transactions.
The aforementioned method of identity verification has become a standard that many cryptocurrency sites follow in order to maintain security on their platforms, part of what is called AML ---short for Anti Money Laundering--- regulations, officially called Know Your Client process or KYC. There are three steps in this process:
1. Customer Identification: Some sites require rigorous information such as the customer’s picture, legal name, address, date of birth, and legal identification such as a driver’s license or passport. Others only require an active phone number and email address, which is basically their online identification.
2. Customer Due Diligence: These are metrics that sites use for assessing the customer and the site’s relationship risks. They are rated based on regular check-ins, customer surveys, and reviews on both sides.
3. Continuous Monitoring: Easy to conclude, this just requires the service provider to keep a constant check on their customers, looking for suspicious activity that could be linked to illicit activity.
Then is it secure?
There is a current debate that goes “is it better to make blockchain transactions reversible or identify the participants?” when it comes to combating crypto-crime, but the reality is that the latter option has proven to be efficient, as well as serves respect to the main goal of the blockchain system in and of itself. Of course, there are blockchain systems such as ZCash or Monero that are made with the full intent of keeping participants’ information private, but there is no affirmation that all of the owners of such coins are felons with the sole purpose of committing schemes and frauds.
In reality, the numbers mentioned at the beginning of this article, the all-time high value of crypto crime of $14 Billion, do not tell the complete story. Yes, the quantity is correct and it is a huge amount of money, but it is directly linked with the huge rise of crypto popularity in the world last year that served as an alternative for those who were facing the outcome of a pandemic that left many unemployed and with no clear vision of their future. In fact, the industry hit an all-time low of transactions linked with cryptocurrencies –0.15% of all cryptocurrency transactions, compared to 0.67% for the previous year.
Therefore, although we can not ignore the fact that crimes happen inside the community, the public can not accuse all of us of delinquency, when trillions are lost in offline crimes committed in fiat currencies like USD. It is an unfair and incorrect assumption that only regresses the industry’s constant innovation.
Karliana Medina