The crypto sphere has long had a reputation for being a space inhabited by thieves, hackers, money launderers, drug dealers, and other criminals. This reputation has, of course, always been greatly exaggerated. The majority of crypto investment has been speculation based on the price of a highly volatile but extremely undervalued asset class. However, that's not to say that the reputation is completely unfounded. Much criminal activity has been able to thrive thanks to the anonymity and lack of regulation afforded by cryptocurrency. That is rapidly changing, though. As the market cap of crypto has increased, more and more scrutiny has been brought to the space. Because of how accessible every transaction on a publicly shared blockchain is, this scrutiny has meant that users' anonymity is not the implicit necessity that it once was. Crypto's Rocky Past Crypto has often been characterized as a bit of a financial Wild West, and it's hard to disagree with this. As a new technology, it is likened to an open land full of untapped resources and danger. Huge amounts of opportunity are afforded to the bold. It is a space of innovation and uncertainty, and just like the Wild West, crypto has given rise to different criminal enterprises. Perhaps the most infamous examples of criminality within the crypto sphere have been hacks of centralized exchanges. The most well-known was Mt. Gox which between 2011 and 2014 saw more than $350 million worth of Bitcoin stolen. At the time, Mt. Gox was handling more than 70% of all worldwide bitcoin transactions. The revelation that so many Bitcoins had been stolen rocked the crypto sphere and caused Mt. Gox to begin liquidation processes. The price of Bitcoin drops by nearly 80% in some places as a result of the news. The fact that one single entity could fail so spectacularly and that that failure should have such an influence on the market at large was seen by many as proof of crypto's illegitimacy and the danger it posed to investors. And the hacks didn’t stop there. Since then, Bitstamp has seen $5 million worth of cryptocurrencies stolen, Bitfinex lost $72 million through an exploited exchange wallet, NiceHash lost more than $60 million in 2017, and in 2018 $400 million in cryptocurrencies was stolen from Coincheck. However, these are not the only criminal activities that were taking place in the crypto sphere. The Silk Road was an online black market hosted on the Dark Web that sold everything from drugs to stolen credit cards to murderers-for-hire. Bitcoin was the primary means of exchange for any illicit goods or services. It was shut down by the US government in 2013, and last year many of the Bitcoin traded on The Silk Road were finally seized. In fact, the amount of Bitcoin seized, valued at the time , is the largest amount of cryptocurrency seized to date by the Department of Justice. This does demonstrate that crypto has indeed been a significant facilitator to at least some criminal activity. over $1 billion A New Era for Crypto That being said, though, the use of cryptocurrencies in illegal activities has always been dramatically overstated. by in 2021, which analyzed cryptocurrency activity in 2019, found that just 2.1% of all cryptocurrency transaction volume was used for criminal activity. This number fell to just 0.34% in 2021. The UN estimates that between 2% and 5% of global GDP can be connected to money laundering and illicit activity, meaning that, at worst, cryptocurrency is currently utilized for criminal activity at less than 25% the rate of FIAT. A report published Chainalysis In order to attract institutions into the crypto sphere and bring crypto to the next level, it is vital that cryptocurrency completely sheds its criminal image. There are many blockchain projects currently thriving that aim to do just that and ensure investors of the security of their funds. For example, we have seen a huge rise in the number of projects that offer smart contract audits that verify that decentralized exchanges and lending services cannot be hacked. Companies like provide blockchain security consulting, web/mobile penetration testing, coordination of bounty programs, and crypto exchange ratings. Meanwhile, has developed a decentralized security network that will audit smart contracts. This involves users performing automated smart contract security reviews across its global network of decentralized security notes. Hacken Quantstamp Another layer of security that has been applied to the crypto sphere is the ability for crypto investigators to use more and more advanced tools to track the movement of funds through a blockchain. Hacking an exchange or a smart contract is just the first thing a thief has to do to gain ownership of another person's funds. While they might be able to get the funds into an anonymous wallet that they have access to, the transactions can be watched and tracked as they move through the blockchain. This makes it very difficult to convert crypto into the much less traceable and much more spendable FIAT. Companies like connect victims to a global network of investigators that will notify blockchain services so they don’t receive defrauded crypto. Investigation partners will then be contacted, and if the thief attempts to convert the defrauded crypto via any legitimate exchange, the funds can be returned to the victim. reclaim crypto Another service that will further legitimize crypto in the eyes of institutional investors is offering crypto holders the opportunity to voluntarily surrender their own anonymity. Projects like create an off-chain title registry for cryptocurrency. This allows investors to verify their ownership of crypto assets. With a third-party register, individuals can protect the contents of their crypto wallet. These services also allow investors to show proof of collateral or reserve when engaging in transactions or leveraging other services. TransitNet The reputation crypto has as a hive of illegal activity was never going to last once the mainstream started paying attention to it. In fact, with the publicly available list of transactions that blockchain provides, crypto always had the tools needed to create an economy that's more transparent and secure than anything offered by FIAT. Now that institutional investors are creating a demand for a more secure blockchain, projects are properly utilizing these tools and making crypto a more legitimate space. While these developments might be off-putting to old-school crypto holders, they are vital for crypto to fulfill its full potential.

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