Criminals love the lawless frontier of the crypto world
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Web3 has a crime problem, and we don’t mean Hamburglar-level mischief. We mean $14 billion-stolen-from-crypto-users-in-2021-level badass.
Crypto innovators wanted to wriggle out of Big Brother’s iron grip on the regulated financial system after the Great Recession of 2008. A new industry emerged without public agencies or companies acting as escorts. The blockchain—software that lives on top of self-governing networks of computers—allows users to mask their identities.
Thieves, fraudsters and terrorists figured out how to swipe crypto, then run it through transactions that can scrub-a-dub-dub the trail of their loot. Masked criminals with laundered money can disappear in the blink of an eye on the internet – the fastest getaway car in history.
Headlines of six or even nine–figure hacks of major exchanges like Binance have become as common as new Halloween sequel.
Since 2014, hackers have stolen hundreds of millions of dollars from Coinbase, Crypto.com, Mt. Gox, Axie Infinity and Bitfinex, to name a handful. On the latest exchange: A New York couple was charged this year with trying — and failing — to launder $3.6 billion in stolen bitcoin from Bitfinex in small amounts (doing it all at once would have alerted federal law enforcement) .
Corporations are not completely lawless
Some companies use the same checklist to verify a user’s identity that traditional financiers use to comply with regulations (name, address, yada yada). This checklist is called know your customer, or KYC. While this standard can help keep a lid on illegal activity, it’s also a no-no to some crypto-purists who don’t want the space to bend even a tiny bit to a central authority.
But Nick Percoco, head of security at Kraken, a major exchange, told Incrypto that the steps are mandatory to operate in certain locations. Also, we don’t yet live in an ideal decentralized reality where we can go without them and still avoid banditry.
“Where there are funds and where there are things of value, crime will naturally follow every place on the planet,” Percoco said.
Bottom line: The ability to mask your identity, the ease of making payments across international borders, and the anti-government ethos of crypto countries result in a crime-friendly border. Buyer beware.—KC
