Cryptocurrencies and Money Laundering - Dirty Washing

Cryptocurrencies and Money Laundering – Dirty Washing


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Here at Newconomy we’ve published several articles concerning the common allegation of money laundering and cryptocurrencies. Today we’re going to take a closer look at what exactly these allegations are, and their contexts in the wider world of global finance.

Sticking Stereotypes

Talk to almost anyone who isn’t familiar with Bitcoin or cryptocurrencies, and more often than not the subject of illegality or wrongdoing will crop up. And this shouldn’t be a surprise. Buffett, Gates, even Dimon of J.P.Morgan have all at some point put ‘the boot in’ to Bitcoin and cryptocurrency. Some of our favorite quotes include:

‘[Bitcoin] itself is creating nothing. When you’re buying nonproductive assets, all you’re counting on is the next person is going to pay you more because they’re even more excited about another next person coming along.’ ‘probably rat poison squared.’ – Buffett, May 7, 2018

‘It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed” – Dimon, September 12, 2017

‘As an asset class, you’re not producing anything and so you shouldn’t expect it to go up. It’s kind of a pure ‘greater fool theory’ type of investment,’ – Gates, May 8, 2018

Then there are the stories of how criminals use Bitcoin and other cryptocurrencies to launder money or buy illegal drugs/paraphernalia – such as the ones from now-closed online ‘one-stop-shop’ Silk Road. There have even been accusations of cryptocurrencies being used by online pedophile gangs. But how true (and relevant) are they in the wider context of global money?

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The Banksters

Incredibly, despite the noise and furor that often surrounds these ‘illegal’, ‘dodgy’, ‘rat poison squared’ digital assets – the vast majority of illegal transactions pass through entirely legitimate banks. And to prove our point, here’s a short list of what they have been caught doing:

  1. HSBC (UK) – fined $1.9 billion for ‘failing to monitor’ over $670 billion in wire transfers from Mexico and more than $9.4 billion in purchases of U.S. dollars (deferred 2012 US prosecution). An elaborate and well-known system allowed for the deposits and transfers of Mexican and Colombian drug cartels to launder their money.
  1. Standard Chartered (UK) – $667 million in fines for violating U.S. sanctions on Iran. $300 million later fined by the State of New York for ‘weak anti-money laundering controls’.
  1. Danske Bank (Denmark) – the Danish bank admitted that roughly $200 billion in ‘potentially illegal funds’ had moved through its Estonian subsidiary over 9 years, despite the warnings of regulators and whistleblowers.]
  1. JP Morgan Chase (US) – ignored red flags over 15 years regarding the dealings of Wall Street financier and Ponzi scheme creator Bernie Madoff, who used his bank account to run the largest Ponzi scheme in history – totaling an insane $65 billion.
  1. Commerzbank (Germany) – fined $1.45 billion for processing over $250 billion in transactions on behalf of Sudanese and Iranian entities between 2002 and 2008.

The above list is literally the tip of the money laundering iceberg with regards to national and international banks. And these are just the known transactions.

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The Numbers Don’t Add Up

And here’s the rub. If you only total the fines that these five banks have been charged (not the money they have laundered) it adds up to $4.3 billion, or to put it another way, the 4th largest ‘market cap’ in context of the cryptocurrency ecosystem.

And yet, this amount pales into insignificance when compared to the actual money laundered – with these 5 banks alone processing a staggering $+1 trillion – more than 7.5 times the total market cap of all cryptocurrencies. Figures point to total global money laundering to be well over $2 trillion annually.

And there we reveal the lie. The inconsistencies. If cryptocurrencies are so dangerous if they truly enable all of this illegality, then how is it possible for them to launder in excess of 14 times their total market cap? The simple answer is, they can’t.


Once we have clearly (and simply) demonstrated that the laundering of money is very much the bread-and-butter of legacy financial systems, and not physically possible for cryptocurrencies to achieve in any meaningful way, we can move the conversation on to how public ledgers – networks visible and independently auditable to all – are the perfect antidote to criminal transactions. Indeed, some legislators have started to jokily ‘encourage’ criminals to use Bitcoin because of how easy it would make to track their operations.

It, therefore, stands to reason that the legacy systems and criminals that use their payment channels stand to lose the most if public cryptocurrencies are adopted en mass. Not only because of the legal revenues that the banks would miss out of from law-abiding citizens, but also because both groups would have nowhere to hide the illegal transactions they so handsomely benefit from.

So next time we hear a statement from a senior banker or legislator, we should remind ourselves of what these institutions get away with on a daily basis. And let’s not forget who caused the 2008 financial crisis in the first place (hint: it wasn’t Bitcoin).