Gary Gensler, the Securities and Exchange Commission (SEC) Chair, in a candid interview on Squawk Box, criticized the extensive swindles and distortions that are going through the cryptocurrency world. Gensler said, “This is a field that’s been rife with fraud and manipulation. Look at all the bankruptcies. It’s not just one entity. It’s after entity after entity lining up in the bankruptcy court.”
Challenging the Crypto Narrative
John Reed Stark, Former Chief of SEC’s Office of Internet Enforcement, challenged arguments downplaying cyber-related offences on his X (Twitter) account. Contradicting those who argue that fiat fraud is more than crypto mischief, Stark dismissed such analogies as wrong and deceitful. Stark said:
What every study shows is that crypto has evolved into the killer app for criminals, ushering in a crypto-crime wave of epic proportions. Clearly, the scale of crime in crypto is orders of magnitude greater than what it is in traditional finance.
Stark’s sentiments are similar to those of Alison Jimenez, a seasoned AML professional who recently testified before Congress. Jimenez disassembled the arguments which sought to downplay virtual assets-related crimes through clear evidence and common sense. She drew attention to the wrong comparisons between fiat and crypto that usually missed out on important nuances in discussions on illicit finance.
According to Jimenez, placing virtual assets crime into context is necessary, but there is no point in making false comparisons, she declared. She emphasized that attributing the low level of virtual currency involvement in illegal activities merely to blockchain analytics is missing out on important aspects. Additionally, she said that such an analysis could not fully capture the extent of these crimes and also highlighted how blockchain analytics do not provide a complete picture of underground finance networks.
As Jimenez attested, that is the very reason that crimes in the crypto realm have to be handled with sensitivity and precision. She added that it is not virtual currency in itself that made the asset a beacon of attractiveness for criminal activity but that it was due to the system vulnerabilities and regulatory omissions. Jimenez emphasized that any measure aiming at illicit finance could have efficacy only if accompanied by a comprehensive approach, which would include addressing the exaggerative transaction volumes and hidden fund movements that are typical of the markets.
But as the regulators and legislators start thinking through various issues related to crypto, voices like Gensler’s, Stark’s, or Jimenez’s prove very helpful in leading the way. Their thoughts simply expound on the many challenges posed by crimes committed within the crypto ecosystem, urging stakeholders to develop a properly balanced approach to understanding based on solid empirical evidence and expert analysis.