Bitcoin’s Double-Edged Sword: Freedom & Accountability
A common question I get is about illicit activity on the bitcoin network. There's a misconception (mostly amongst critics and sceptics) that Bitcoin is a tool for criminals. In reality, bitcoin is a tool for freedom, empowering millions of people towards financial freedom. Its actual usage in illicit activity is low and its blockchain has been used by law enforcement as a tool to track criminals. Much like the internet, we should expect this false narrative to transform over time. Bitcoin will be seen for what it is: a neutral technology, a piece of infrastructure that betters the lives of millions.
Technology is ethically neutral
Bitcoin’s value is not primarily determined by who uses it. That’s not to say it doesn’t matter but focusing too much on who uses Bitcoin, particularly the potentially unsavory actors, is a mistake. It shifts attention away from the broader and more important aspects of what Bitcoin represents.
Many powerful technologies are used by both good and bad actors. For example, criminals extensively use the US dollar, facebook, cars, knives and the internet. Does this make those technologies inherently criminal? Of course not. It simply means that these tools have powerful utility. It is not an indictment of their ethics.
We could stop right here but let's dive a little deeper into the prevalence of crime in crypto.
Bitcoin as a Tool for Law Enforcement
There was a time when Bitcoin seemed attractive to criminals because they believed it was anonymous. This assumption was wrong. Bitcoin is not anonymous—it’s pseudonymous. While transactions don’t directly include names, all activity is recorded on the blockchain. Each transaction has a public history that can often be linked to an exchange or another entity that stores personal information.
Authorities have leveraged this transparency in notable criminal cases, making it easier for law enforcement to track bad actors. Not that I agree with the sentencing (which was recently overturned), but Silk Road is a good example. The blockchain's permanent record played a critical role in tracking down those involved.
The Double-Edged Sword of Token Issuance
Chainalysis findings suggest that illicit activity on the Bitcoin network is minimal compared to other financial technologies and has decreased over time. 0.14% of total on-chain transaction volume is reported as illicit activity, which encompasses a range of unlawful actions, including Darknet Market Transactions, Ransomware Payments, Sanctions Evasion, Fraud and Scams
Are Chainanalysis' numbers truly representative? I don't know. The methodology looks credible - you can assess it yourself here. In spite of the low prevalence in the data, there’s no denying that crypto’s double-edged sword. The ability to issue tokens from anywhere in the world creates fertile ground for scammers. This technology democratizes finance and enables decentralized innovation, but it also lowers the barrier to entry for bad actors.
One of the most common scams in crypto is the pump-and-dump scheme. This isn’t unique to crypto—it’s a scam that’s existed in traditional finance for centuries. But crypto’s purely digital and relatively unregulated nature makes it easier for scammers to exploit.
The model is simple:
A token is launched, often with an appealing narrative.
The issuer holds a significant portion of the supply.
They pump the token’s price through marketing and hype.
Once the price surges, they dump their holdings on unsuspecting buyers.
In my opinion, celebrity memecoins - like TRUMP and MELANIA which were launched by Trump ahead of the elections - could easily fit into the same category. This perspective may provoke debate, but it’s rooted in the reality that many tokens offer little intrinsic value. While some may argue that meme coins offer value to token holders, they often serve as a tool for capturing value from unsuspecting fan. This is unfortunate but there's no easy way around it when anyone can launch a token at any time of day from any location in the world.
Traditional Finance vs. Crypto: Trust vs Accountability
Traditional finance has long tried to prevent these schemes by imposing rigorous regulatory hurdles. For example, companies must meet strict criteria to list their assets on public exchanges. This doesn’t eliminate pump-and-dump schemes but it does set a higher bar for bad actors.
In crypto, regulation is evolving, but it won't fully replicate traditional finance. For instance:
Exchanges operating in regulated jurisdictions may face stricter listing requirements.
Hundreds of exchanges exist worldwide, each with its own rules and oversight—or lack thereof. Many of them won't follow the same criteria and users from a regulated jurisdiction can easily use a VPN to access the unregulated exchange.
Decentralized exchanges (DEXs) are harder to regulate because they operate globally and without a central authority.
This fragmented landscape makes it impossible to fully prevent token issuance or fraudulent schemes. The very nature of crypto technology ensures that it should remain open, global, and decentralized.
Personal Accountability: A Core Principle of Crypto
Crypto’s core principles emphasize decentralization and personal accountability. Educated participants who focus on whether a project is genuinely decentralized can protect themselves from many scams. And while I am not a sole advocate of bitcoin alone, focusing on it is a key strategy to significantly mitigate scam risk. Do not always be drawn to the next shiny thing! If that shiny thing is centralized, its much more likely to scam you.
Crypto requires individuals to take responsibility for their decisions. This contrasts sharply with traditional finance, which often emphasizes consumer protection. In crypto, the responsibility lies squarely on the individual’s shoulders—a reality that is both empowering and challenging.
Freedom is not Free
Evidence suggest that major crime in crypto is actually quite contained. My suspicion is that there is a higher prevalence of scammers. Nevertheless, these consequences are part and parcel of free, open, uncensored finance. The freedom that these qualities generate for billions around the world significantly out way the unfortunate incidents that grab headlines from time to time.
Consider people living through hyperinflation, war, political oppression, or even gender oppression. These individuals often lack access to stable financial systems or the ability to transact freely.
The ability to:
Open an account anytime, anywhere, without permission
Send and receive capital without relying on intermediaries or gatekeepers
These features make Bitcoin a profoundly empowering tool for many around the world. It’s a lifeline for individuals who have been excluded from traditional systems.
Afghanistan: Women turn to crypto to feed their families (Business Insider)
For those who remain skeptical, I encourage you to reference previous articles I’ve written on the positive impact Bitcoin is having on people around the world HERE, HERE , HERE, HERE and HERE. While scams and bad actors often dominate headlines, the other side of this technology is deeply empowering.
The Judgments of the Skeptical Lens
Focusing too heavily on the negatives—such as scams or the misuse of crypto—can cause us to lose sight of the incredible positive impact this technology is having. Next time you come across a skeptic levying this narrative I welcome you to challenge them. What data are they looking at? Are they aware of the people using bitcoin for financial freedom? Are they aware of the criminal activity in the traditional banking industry? Perhaps they just don't like bitcoin or don't understand it and they are looking for a reason to avoid engaging?
By condemning the negative aspects without acknowledging the transformative benefits, skeptics risk dismissing a technology that is driving real change in the lives of many people. This duality is part of the reality of innovation: every tool of empowerment has the potential for misuse misconceptions and false narratives that distort its true nature. The internet provides a great example.
In the 1990s when the web was still a novel technology people argued that it was largely being used for pornography. Today, the internet is broadly recognized as a tool for communication, commerce, education, entertainment, and much more. I look forward to the day when bitcoin and decentralised finance are viewed in the same way as the internet, as a tool for communication, commerce, investment, freedom, and much more, and I am confident that it will arise.
