By Alicia Maher
Changpeng Zhao, the CEO of the world’s largest crypto exchange platform, Binance, has stated that cryptocurrencies appear safer than the government-issued fiat currency due to the low crime percentage associated with their adoption.
Zhao added that the percentage showing the total volume of illicit financial transactions among crypto addresses is low.
Compared to fiat, the number of illegal transactions recorded in the crypto space over the past year is a measly 0.15% of the total transaction volumes carried out last year, according to the metrics released by the blockchain-based analytics firm, Chainalysis.
Meanwhile, the above revelation contrasts with the rigid belief held by critics of cryptocurrency, who maintain that the vast majority of illicit financial dealings are carried out via cryptocurrency.
What The Data Says
Considering the Chainalysis data about the rate of crypto-related crimes, it is found that illegal financial dealings in the crypto space reached an all-time high last year, involving $14 billion. Additionally, this is a 79% increase from the previous $7.8 billion recorded in 2020. However, the given figures failed to reveal all that was known about the crime statistics.
Meanwhile, last year’s massive growth of crypto transactions has managed to mask the glaring issues relating to crime percentage going by the trading volume of $15.8 trillion, representing a 567% spike from the 2020 performance. This is to say, the crime statistics involving illicit addresses are quite low when evaluated in the context of the crypto market performance.
Moreover, the only year that happened to have the highest record of illicit financial transactions in the crypto industry is 2019, where it is on record that 3.38% of the year’s transactions were illegal, thanks to the PlusToken Ponzi Scheme that rocked the industry with the involvement of Chinese and South Korean investors.
Regardless of what has occurred previously, all indications point to the gradual decline of financial crimes involving cryptocurrencies. The same cannot be said for fiat, which is where the argument from the Binances’ CEO is pointing.
A United Nations report on illicit financial transactions shows that between $800 billion and $2 trillion are laundered each year. According to experts, this massive figure represents about 5% of global GDP.
Cryptos Are The Perfect Hedge Against Inflation
Aside from being regarded as the currency with the lowest illicit transaction percentage, cryptocurrencies have also proven to be a better hedge against inflation than fiat. The Federal Reserve has recently increased the benchmark interest rate to 0.5%, the highest in three decades. The increase has been critical to the pattern of interest rates in the U.S.
The hike in interest rates comes after an increase in the price of consumer goods and services by 8.5% in March, which is a spillover of the rising global inflation rate after the world recovers from the COVID-19 pandemic.
Cryptocurrency has proven to be a haven for funds during this period, and experts agreed that it would serve as a better hedge against inflation than gold.