Crypto’s uses and misuses: Binance-Reuters quarrel raises questions

Crypto exchange Binance has courted controversy almost from its 2017 beginnings, and five years later, the dustups continue. On June 6, the United States Securities and Exchange Commission was reported to be investigating whether Binance Holdings broke U.S. securities rules in launching its digital tokens. Meanwhile, on the same day, Reuters published a scathing 4,700-word “special report” titled “How crypto giant Binance became a hub for hackers, fraudsters and drug traffickers.”

Binance almost immediately retorted to Reuters with a blog post of its own, warning about “authors and pundits who cherry pick data, rely on conveniently unverifiable ‘leaks’ from regulators, and feed into the cult of crypto paranoia for fame or financial gain.” For good measure, it published “Our Email Exchange With Reuters” — an extensive list of questions that it had received from Reuters reporters Angus Berwick and Tom Wilson for their special report, along with responses from Binance spokesperson Patrick Hillman.

All in all, the donnybrook between two heavyweights from different industries raised some questions not only about Binance — the crypto sector’s largest exchange — but also the global industry, including to what extent is money laundering a crypto sector problem and what does it mean if one of the industry’s top providers is in constant hot water with regulators and investigative journalists?

Maybe Binance is being unfairly targeted, but if not, are all cryptocurrency and blockchain players tarred now by the actions of one renegade player?

It’s worth recounting that after the report was published, other parties seized upon its findings. New York Times columnist Paul Krugman, for instance, asked in an opinion column what cryptocurrencies as a class were really good for:

“OK, criminals seem to find crypto useful; a recent Reuters investigation found that over the past five years the crypto exchange Binance has laundered at least $2.35 billion in illicit funds. But where are the legitimate applications?”

Does crypto have a money laundering problem?

The $2.35 billion “stemming from hacks, investment frauds and illegal drug sales” from 2017 to 2021 that Reuters identified sounds like a lot of money — but is it really, at least in the context of a $1 trillion industry?

Analytics firm Chainalysis looked at all crypto transactions in 2021 and found that only 0.15% involved illicit addresses “despite the raw value of illicit transaction volume reaching its highest level ever.” Moreover, the amount of money laundered globally in one year — not just in the crypto sector — is 2–5% of global GDP, somewhere between $800 billion and $2 trillion, according to the United Nations, which dwarfs cryptoverse activity.

Still, maybe that’s not the point. “Let us not forget that, since the early days of Bitcoin, crypto, per se, has had the reputation of being an instrument for money laundering — and rightly so,” Markus…