Ransom Paid, Money Washed: How Crypto Became Crime’s Favorite Laundromat -By Fransiscus Nanga Roka

Crypto was marketed as a libertarian awakening of world freedom. To criminals, it got even better: a concealment revolution. Shell companies in tropical secrecy havens, jittery couriers lugging bags of cash and colluding bankers who close their eyes are no longer necessary to the laundering chain. At the same time, as machine speeds become capable of traversing digital wallets and cross-border transfers, mixers chain-hopping & broken-up jurisdictions? Where decades of institutional corruption once required lubrication that included cash and complexity, now it can all be achieved through code, opacity and a few regulatory loopholes. It is not just financial engineering that results from that. Yes, in some places it is the industrialization of dirty money.

This truth could be overlooked by ransomware. A hospital is crippled, a pipeline goes down, and a corporation gets locked out of its own systems then the payment muck arrives in crypto. While the researchers known that there are places where payment is made under pressure, passing through wallets it scattered across services leaving behind traces and moving from one network to another making tracking more difficult. Before authorities can reconstruct the trail, the funds are typically washed through such an extensive labyrinth of cyberdarkness that prompt recapture is impossible. The blood is spilled in the real world, but laundering goes more and more on a financial scene that still pats itself on its back for being inventive.

The word disruptive is a term for disdain rather than celebration. Crypto did disrupt finance. This also destabilised friction, accountability and many of the choke points upon which anti-money laundering systems were built. Banks might have plenty of shortcomings, but they are at least subject to a combination of reporting obligations; patient verification protocols; transaction monitoring for suspicious behaviour (e.g. shell companies); and legal compulsion if all else fails. It was precisely the dependence on those intermediaries that crypto’s most lauded architecture sought to mitigate. One of its libertarian promises was to eliminate gatekeepers. It had precisely the same advantage in criminality.

This is where the hypocritical behavior kicks in. The crypto sector never tires of declaring how all that blockchain transparency makes spotting illicit finance by cash easier. That statement is only half true and in exactly the language of industries attempting to protect profitable ambiguity. Yes, some transactions are visible. Note that visibility is not meaningful accountability. A public ledger, is not a public identity system. A wallet address is not a face, it has no nationality to prosecute. The existence of on-chain traces does not make some people feel as if they will be able to enforce their prosecution decisions in this atmosphere, where criminals can move value across jurisdictions and between different jurisdictions outside conventional banking rails. A new way for observers to watch money evaporate is all it offers.

States, however, are hardly innocent. For years, governments have played tough at the points of control that are easiest to grasp (exchanges, custodianship and reporting entities) while avoiding a deeper acceptance: decentralized financial infrastructure has created permanent zones where they can see only partially. They publish reports that crypto is regulated now. What that usually means in practice is more narrow and much less comforting: some gateways are supervised, some actors licensed, and a few suspicious flows flagged ex post. That is not control. That is perimeter management disguised as mastery.

Yet all the while, criminals evolve quicker than lawmakers. They do not require absolute anonymity. They require just enough delay, just enough fragmentation, the right kind of jurisdictional confusion in their favour and a modicum of technical complexity to remain ever ahead of seizure/extradition/attribution. That is the kind of operating environment that crypto affords them. Not always, not everywhere but frequently enough to make it appealing. When the crime goes global and law enforcement is limited nationally, in nature good enough has become good enough for concealment.

None of this means that Crypto is naturally criminal that would be lazy. There is nothing wrong with the technologies themselves. However, it is when legal and political systems confuse neutrality of design with neutrality of consequence that they become dangerous. A tool to help handcuff you can also pay huge dividends for extortionists. But backing off the need for a system that makes us reliant on banks and the paraphernalia of security we erected around them is also something like reducing our reliance on those safeguards. And that failure to grapple honestly with the contradiction of our Afghanistan dilemma has poisoned the entire discourse.

So let us dispense with the pretext that crypto is hiding behind an existential issue whether it has real uses or not. Of course it does. The problem is whether the world will own up to what crypto has also become: a fabulously efficient laundering platform for an age of transnational crime. Not because every wallet is a criminal. Not that every user is a suspect. Though, of course, there was always going to be an irresistible demand for the sort of ecosystem optimized around timeliness and borderlessness and lessened intermediation into which one could wash coercion that some sought to transmute into wealth.

Bank secrecy provided a veil for dirty money. Now it cloaks itself in techno romance, regulatory disarray and political cowardice of states that still think they are at the helm. Ransom is paid in fear. Laundering is completed in silence. And crypto has turned into the bridge between both.

Fransiscus Nanga Roka

Faculty of Law University 17 August 1945 Surabaya Indonesia