Is crypto really the wild west of scams or is TradFi just as bad?

There’s no shying away from the fact that 2022 was a bad year for headlines about crypto crime — some estimates put the figure at $20billion for the year alone 😱and there’s plenty of twitter threads and websites tracking the various scams and attacks happening across the space e.g https://web3isgoinggreat.com/. I even get my gran asking me about crypto crime because she’s read about it in a BBC headline!

So is crypto really an unparalleled wild west of crime unlike TradFi has ever seen?

Let’s do some comparisons….

2022 gave us the ultimate crypto bad apple examples of FTX, the Terra ecosystem collapse which contributed to bringing a bear market in, and insolvencies aplenty with 3AC, Voyager, Celsius and BlockFi. So are crypto firms acting more loose with the rules (whether the letter or just spirit of the law) or are TradFis just as bad?

There’s less regulation to fall foul of within the crypto industry, however 2022 saw some notable fines with BlockFi agreeing a $100m fine for its lending product, Nvidia paying $5.5 million for disclosure errors, and Bittrex settling for $53m in fines for sanctions and AML violations. As more regulation inevitably comes into the space it’s highly likely we’ll see fines for misdemeanours and regulatory breaches, however at least for now the fines in TradFi vastly tower over that of crypto firms across the last 14 years.

But the behaviour of entities in the space is only one way to look at the wild west nature, another important metric is how it’s impacting people on the ground and how much is being stolen from them.

In 2022 it’s reported that $3.8billion in cryptoassets were linked to crypto crime. That’s a huge number. However in the context of daily trading volume of c$50billion it reflects just 0.02% of all trading volume. It’s still a huge number though, and one which everyone in the ecosystem should be trying to reduce.

When we compare this to some fiat crime statistics:

• It’s estimated that the amount of money laundered globally in one year is 2–5% of global GDP. That’s $800 billion — $2 trillion. Notably that’s over double the ENTIRE crypto industry market cap in money laundering for fiat alone.
• According to the International Compliance Association, financial crime accounts for 3.6% of global GDP — $1.44 trillion!
• In PwC’s Global Economic Crime and Fraud Survey 2022 respondents reported total losses of US$42B, on top of the damage to brand, reputation and market share
• Federal Trade Commission has reported that in the US alone, identity theft cases registered in 2021 were 22% more than in 2021, costing users $56 billion
• In 2021 alone, companies lost $32 billion due to credit card fraud, and it is projected that this amount will increase to $38 billion by 2027

This is not to say that crypto is some safe haven of all perfectly legitimate activity and fiat is a murky underground of criminal enterprises and activities. Both industries have their good and bad actors and more crime than anyone would like. However I think it’s important that we ground our assessments in data. And so whilst there may be headlines aplenty about the crypto crime impacting businesses and individuals, there could be equally matched headlines about bad behaviour by TradFi institutions and criminals.

Originally published at https://www.linkedin.com.