“Used for fraud, money laundering, and manipulation” is how regulators, legislators, and other critics frequently describe cryptocurrency. It is understandable given high-profile scandals like FTX and TerraLuna. However, this does not make the claims true.
Misconceptions about Crypto Fraud
Cryptocurrency is a complicated global ecosystem. It has operated in a legal and regulatory limbo, but not for nefarious purposes. Its distinct approach to ownership and settlement puts rules written for a different type of financial system to the test. A more objective examination reveals that the majority of the activity labelled as crypto fraud is simply regular fraud that happens to involve crypto.
The vast majority of actual cryptocurrency activity is and has always been fine. The use of cryptocurrencies for fraudulent purposes does not imply that the underlying technology is inherently fraudulent. There is a long history of charismatic hucksters duping people by capitalising on the excitement surrounding new technologies. But, at the end of the day, the FTX shenanigans reveal as much about crypto today as WorldCom’s bad accounting did about the internet 20 years ago. There are no fraud claims in the other high-profile actions involving Coinbase, Bittrex, and Kraken.
All of the claims are registration issues, a result of the industry’s desire for regulatory clarity. Binance’s situation is a little more complicated, as the company took illegal steps to avoid KYC and AML requirements—and has been accused of wash trading. While serious, these violations can and do occur at any intermediary. Just this year, Wells Fargo agreed to a billion-dollar settlement with shareholders for misleading them about regulatory progress related to its fake-account scandal, for which it also paid a multibillion-dollar fine. Binance has never been accused of misappropriating client funds. However, it shows just as worse than a major bank that defrauded shareholders to conceal the severity of its defrauding of customers.
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Summary
To conclude, misconceptions about cryptocurrency such as dismissing it as synonymous with fraud oversimplifies a complex and ever-changing landscape. While there are challenges, the potential benefits of blockchain technology and digital assets cannot be overstated. Policymakers and regulators should take a more nuanced approach. They must recognise the legitimate use cases of cryptocurrency while working toward a balanced regulatory framework that encourages innovation while protecting against illicit activities.
Regulators, legislators, and other critics regularly describe crypto to be synonymous with fraud. Here is why they’re wrong! @FortuneMagazine https://t.co/mTqe4SK5wk
— Crypto Council for Innovation (@crypto_council) December 12, 2023
