Numerous governments are attempting to ban cryptocurrencies, with recent examples from China, India, Turkey and Nigeria. The reason for doing so is simple: The decentralized nature of cryptocurrencies poses a threat to the legacy financial system, and as the technology itself is still in its infancy, it seems to attract hackers. Even so, banning crypto will not dissuade hackers or scammers in the slightest.
Hackers remain drawn to cryptocurrency
Ever since the inception of cryptocurrency, hackers have shown an appetite for this form of money. The perceived appeal of being anonymous when receiving payments has created an aura of invincibility for all cryptocurrencies. However, that is often misunderstood, as none of the public blockchains are private nor anonymous in their current form. While transactions are pseudonymous on the blockchain, users will still need to convert to and from fiat currencies at some point. Those steps often require verifying one's identity through official documents, negating the entire anonymity and privacy aspect.
Related: Report on crypto exchange hacks 2011-2020
Even though most hackers acknowledge that cryptocurrencies lack both privacy and anonymity, the overall crime rates remain relatively high. Despite a significant decrease in crypto-related crimes in 2020, according to a report from security firm CipherTrace, there are still plenty of concerns. For this reason, many governments want to ban cryptocurrencies, as they expect such measures will deter hackers from doing harm.
That outcome seems rather unlikely, though. With tools such as ransomware, malware and other types of criminal activities, it wouldn't take much effort for hackers to change the way they receive payments. Cryptocurrencies offer pseudonymity, but they are not the only payment methods to do so.
These methods offer more privacy
Gift cards, for example, are a convenient, legal way of transferring value from one person to another. Most convenience stores sell gift cards for various services, including Netflix, iTunes, PaySafeCard and so forth. Every gift card has value and does not require a name to acquire or convert to online money. These cards are, in essence, far more private and anonymous than cryptocurrencies will ever be. However, they are also more accessible, making them a more significant problem to governments looking to dissuade hackers.
The same concept applies to prepaid cards for mobile providers. As these cards do not require identity verification to purchase and do not require a check to be activated, they are basically anonymous money. Although prepaid mobile cards aren't necessarily viable across borders, it remains a private way of transferring value from one person to the next.
If governments are serious about dissuading hackers, they will also need to find a way to cut them off from the existing financial system. Bank accounts and payment cards can be hacked and abused far too conveniently, even in 2021. Hackers and other criminals can access a bank account through various means, including mobile trojans, fake applications, phishing, keyloggers, man-in-the-middle attacks and so forth. As long as there is a way for hackers to make money without immediate repercussions, they will continue to explore the different options at their disposal.
Related: Don’t blame crypto for ransomware
Putting crypto’s ‘criminal role’ into perspective
While governments strongly believe Bitcoin (BTC) and other cryptocurrencies are the main reason for online crime, the reality is often different. According to a recent Chainalysis report, just 0.34% of the crypto market's combined transaction volume pertained to illicit activity in 2020. That is a sharp decrease from the 2% recorded in 2019. If anything, this research by Chainalysis shows fewer and fewer criminals focus on Bitcoin and other crypto assets.
Digging a bit deeper, it becomes apparent that ransomware remains the top solution for online crime, and it is a very significant threat and problem. As more people now work from home due to COVID-19 restrictions, there are new opportunities for criminals looking to make a quick buck. That doesn’t automatically mean that cryptocurrencies will be phased out, as the majority of consumers have no idea how this industry works.
Related: COVID-19: Decentralization the norm as workplaces adjust to new normal
Conclusion: A crypto ban isn’t the solution
Any government looking to ban cryptocurrencies will not be successful for multiple reasons. First of all, it is impossible to prevent people from using crypto assets, as governments have no control over these networks, nor are there any central figureheads or CEOs to pressure into shutting down activity, making it nearly impossible for governments to act. While regulators can make it difficult for service providers, those companies are not necessarily essential for sustaining cryptocurrencies.
Moreover, the numerous options that hackers and scammers have at their disposal to make money should not be ignored. If the goal is to prevent illicit activity, tackling the abuse of traditional finance needs to be the top priority. Cryptocurrencies represent far less of a market for criminals compared with bank-related services and products, as well as gift cards and other forms of pseudonymous money. Addressing cybercrime is a pressing matter as costs spiral further out of control, but the focus should not be on cryptocurrencies.
Any attempt to crack down on cryptocurrency “because criminals use it” is bogus. If that truly is the objective, there are different approaches to explore, rather than banning something. Since one cannot use cryptocurrencies without the traditional financial system, it is not hard to see where governments should focus their attention. Unfortunately, none of them seem willing to acknowledge that the system they help maintain is at fault for most criminal activity today.
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