OPINION, Trending - July 2, 2024

Dispelling Common Crypto Myths

Bahraincover

In the realm of cryptocurrency, misconceptions abound, hindering the understanding and adoption of this transformative technology. Sceptics often propagate the misconception that the crypto and blockchain ecosystem is unsafe and unreliable due to its perceived anonymity and association with criminal activities. However, this narrative is not only false but also undermines the transparency and security inherent in blockchain technology.

Myth 1: Lack of Intrinsic Value

One prevailing myth suggests that digital assets lack intrinsic value because they aren’t backed by tangible assets like fiat currencies. However, fiat currencies themselves, such as the US dollar or British pound, are not backed by physical assets but rather by trust in the issuing government.

Similarly, digital currencies derive their value from the technology underpinning them. Open-source code allows anyone to verify transactions, eliminating the need to trust a third party. This foundation of trust in technology is different from, yet equally valid as, trust in a government.

Moreover, a currency’s value is also tied to its acceptance and adoption. While digital currencies are still gaining traction as a payment tool, their use for payments is steadily increasing. Beyond payments, cryptocurrencies serve as a store of value, akin to commodities like gold. Bitcoin, for instance, and its scarcity, with only 21 million ever to be created, makes it intrinsically disinflationary.

Additionally, smart-contract-enabled assets unlock a myriad of possibilities in the online realm. From distributed governance to digital art and novel financial products, the potential applications are endless.

These are the key principles driving the worth of digital assets: disintermediation, payment facilitation, store-of-value capacity, and technological innovation. Moreover, digital asset adoption rates are trending upward, further solidifying their value proposition.


Myth 2: Crypto Isn’t Real Money

Sceptics often overlook the practical application of digital assets, dismissing them as merely speculative instruments. However, contrary to this perception, cryptocurrencies are increasingly utilised as viable forms of payment worldwide.

Since the historic transaction of Bitcoin for tangible goods in 2010 – famously involving the purchase of two pizzas – individuals globally have leveraged cryptocurrencies to procure essential goods and services, particularly in regions where fiat currency accessibility is limited. In recent years, with the progressive integration of cryptocurrencies into conventional payment infrastructures, numerous services have emerged facilitating the seamless expenditure of digital assets, even at establishments preferring fiat transactions.

An example of this integration is the Binance Card, enabling holders to utilise cryptocurrencies for transactions wherever major fiat payment systems are accepted, albeit currently limited to specific jurisdictions. Furthermore, innovations like Binance Pay offer contactless, borderless, and secure crypto-payment solutions, significantly expanding the avenues for cryptocurrency expenditure worldwide. These advancements collectively disprove the myth that cryptocurrencies lack real-world utility.


Myth 3: Crypto is Inherently Unsafe

Critics often claim that the anonymity and decentralisation of cryptocurrencies make them vulnerable to criminal exploitation. While it’s true that instances of fraud and money laundering exist in the crypto space, they represent a tiny fraction of overall transactions.

According to the 2023 Crypto Crime Report by Chainalysis, criminal activity accounted for just 0.34% of all crypto transactions in 2023, a decline from 0.42% the year before. This pales in comparison to the approximately $2 trillion or around 5% of the world’s GDP laundered through traditional financial systems annually.

The transparency of blockchain technology serves as a deterrent to criminal activity, as every transaction is publicly recorded and traceable. Law enforcement agencies worldwide leverage blockchain’s transparency to track illicit funds, a capability not available in traditional finance.


Myth 4: Lack of Compliance and Security

Another misconception is that crypto platforms lack compliance and security measures, making them vulnerable to illicit activities. However, leading crypto firms have implemented robust anti-money laundering (AML) and know-your-customer (KYC) protocols to prevent criminal exploitation.

Platforms like Binance prioritise regulatory compliance and user security, employing identity verification systems and proactive monitoring tools to detect suspicious activity. These measures ensure that transactions are legal and compliant with relevant regulations.


Solution Rather Than Problem

As we look toward the future of finance and consider the direction in which the industry is headed, it is essential to continuously review and debunk outdated and entirely flawed perceptions of digital assets. Far from being the predominant instrument for financial crime, cryptocurrencies constitute a relatively insignificant portion of global illicit funds. Data show that traditional methods and tools such as real estate transactions and legacy banking practices stand as far more substantial conduits for illicit activity such as money laundering.

Instead of singling out cryptocurrencies as scapegoats for systemic financial crimes, we should pay more attention to these traditional domains and the issues ingrained within them.

Despite enduring scepticism, the compelling data from various unaffiliated sources underscores the significant developments in the crypto industry and how far it is from being an ideal frontier for bad actors. A systemic issue demands systemic solutions, and digital assets should be seen as part of this solution rather than a problem.

This article is written by Tameem AlMoosawi, General Manager of Binance Bahrain B.S.C (c)


Images for the article are supplied by Binance Middle East

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