Federal Reserve President: Bitcoin is a Criminal Tool

Reading Time: 2 minutes

• Minneapolis Fed President Neel Kashkari has criticized Bitcoin, claiming it facilitates illegal activities like drug trafficking
• Kashkari told an audience yesterday that there are no meaningful use cases for Bitcoin or other cryptocurrencies beyond illegal activities
• His views do not tally with data, while both presidential candidates have embraced crypto

Minneapolis Federal Reserve President Neel Kashkari last night heavily criticized cryptocurrencies, particularly Bitcoin, arguing that their only use is in the criminal underworld. During a town hall in Wisconsin, Kashkari argued that digital currencies lack practical utility and are primarily associated with criminal activities, including money laundering and the drug trade. However, his comments are not borne out by facts, while both presidential candidates have courted the crypto sector, putting him out of touch with changing views on the sector.

Kashkari: Only Criminals Using Bitcoin

Kashkari claimed during the town hall that he was “more optimistic about Bitcoin five or six years ago” but that he now views it as little more than a tool for illicit transactions. The Fed President added that “very few transactions are actually happening” on the blockchain and that no one is paying for goods and services using cryptocurrencies except for “buying drugs or other illegal activities.”

His views are aligned with other critics who have raised concerns over the anonymity offered by some cryptocurrencies, which make them attractive for criminals, with Senator Elizabeth Warren among the most vocal.

Outdated Views Will Take Time to Change

Kashkari’s views echo the views held by many with only a loose connection to the space. Those more familiar with it know that, while Bitcoin was used almost solely for illicit use in its early days, its usage among the criminal class is dwarfed by legitimate use. Darknet markets like Silk Road, AlphaBay, and Hansa used Bitcoin as the primary currency, but the closure of Silk Road in 2013 and AlphaBay in 2017 increased the risk of using such sites, leading to a reduction in their use.

In 2021, blockchain investigation firm Chainalysis found that that criminal activity made up just 0.34% of cryptocurrency trades in 2020, a drop of 83.8% from 2019. While there have been high-profile instances where crypto has been used as part of criminal activity, such as headline-grabbing ransomware events, legitimate use still massively outweighs it.

Regulations have also reduced the use of cryptocurrencies for illegal use. Global crackdowns on crypto transactions have resulted in a massive drop in the use of privacy coins, which are now banned in many countries, while governments can now trace crypto transactions with ease, especially ones concerning Bitcoin.

Of course, with hacks and such illicit use still making headlines, it will take some time for cryptocurrencies to shake their ties to the underworld, but only time and legitimate adoption will bridge that divide.