Treasury Secretary Janet Yellen said in a release Tuesday that the exchange allowed illicit actors to make more than 100,000 transactions that supported activities such as terrorism and illegal narcotics and that it allowed more than 1.5 million virtual currency trades that violated U.S. sanctions. It also allowed transactions associated with terrorist groups such as Hamas’ Al-Qassam Brigades, Palestinian Islamic Jihad, al-Qaida and ISIS, Yellen said in the release, noting Binance “never filed a single suspicious activity report.” U.S. Attorney General Merrick Garland said in a press conference Tuesday that the fine is “one of the largest penalties we have ever obtained.” “Using new technology to break the law does not make you a disruptor. It makes you a criminal,” Garland said.
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security and operates on a decentralized network of computers, typically based on blockchain technology. Unlike traditional currencies issued by governments and central banks (known as fiat currencies), cryptocurrencies are not controlled by any single entity. Instead, they rely on a distributed ledger, usually a blockchain, to record and verify transactions.
Cryptocurrencies operate on a decentralized network of computers, meaning there is no central authority, such as a government or financial institution, controlling the currency. This decentralization is often achieved through blockchain technology. Most cryptocurrencies use blockchain as their underlying technology. A blockchain is a distributed ledger that records all transactions across a network of computers in a secure and transparent manner. Each block in the chain contains a list of transactions, and once a block is filled, it is linked to the previous one, forming a chain of blocks. Cryptocurrencies use cryptographic techniques to secure transactions and control the creation of new units. Public and private keys are used to facilitate secure transactions between parties.
Many cryptocurrencies have a capped supply, meaning there is a maximum number of units that can ever be created. For example, the total supply of Bitcoin is capped at 21 million coins, which is intended to create scarcity and potentially influence value over time. While transactions on a blockchain are transparent and can be viewed by anyone, the identities of the parties involved are often pseudonymous. Users are represented by cryptographic addresses rather than personal information. However, the level of anonymity can vary among different cryptocurrencies.
Cryptocurrencies can be sent or received anywhere in the world, and transactions can be processed relatively quickly compared to traditional financial systems. This global accessibility is facilitated by the decentralized nature of the networks.
Some cryptocurrencies, like Ethereum, allow the creation and execution of smart contracts. Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute and enforce the terms when predefined conditions are met.
It's important to note that the cryptocurrency space is dynamic, and new developments, technologies, and projects continue to emerge. As with any investment or financial tool, individuals should conduct thorough research and exercise caution when dealing with cryptocurrencies. Cryptocurrencies, while innovative and potentially transformative, also come with various risks and dangers. It's important for individuals to be aware of these risks before investing or participating in the cryptocurrency market. Some of the notable dangers include:
Volatility: Cryptocurrency prices are highly volatile, with values often experiencing significant and rapid fluctuations. While this volatility can present opportunities for profit, it also poses a substantial risk of financial loss. Investors can face substantial losses if the market moves against their positions.
Lack of Regulation: The cryptocurrency market is still relatively young and lacks the regulatory oversight that traditional financial markets have. This absence of regulation can make cryptocurrencies more susceptible to fraud, market manipulation, and other illegal activities.
Security Concerns: Cryptocurrencies are stored in digital wallets, and the security of these wallets is crucial. However, there have been instances of hacking and security breaches that have resulted in the loss of funds. Additionally, the risk of phishing attacks and scams is prevalent in the cryptocurrency space.
Lack of Consumer Protections: Unlike traditional bank accounts or investment products, cryptocurrencies are not insured by government agencies. If you lose access to your wallet or your funds are stolen, there may be limited recourse for recovery.
Technological Risks: Cryptocurrencies and their underlying blockchain technology are still evolving. Technical vulnerabilities, bugs, or flaws in the code could lead to unintended consequences, such as network forks or security vulnerabilities.
Market Risks: The cryptocurrency market is influenced by various factors, including technological developments, regulatory changes, market sentiment, and macroeconomic trends. External factors, such as regulatory crackdowns or changes in public perception, can significantly impact the value of cryptocurrencies.
Speculative Nature: Many people invest in cryptocurrencies with the expectation of making a quick profit. This speculative mindset can lead to market bubbles and subsequent crashes, as seen in the past with significant price corrections.
Legal and Regulatory Risks: The legal status of cryptocurrencies varies by country, and regulatory frameworks are still being developed. Changes in regulations or government policies can have a substantial impact on the cryptocurrency market.
Market Manipulation: Given the relatively low liquidity of some cryptocurrencies and the absence of regulatory oversight, market manipulation can occur. Pump-and-dump schemes, where the price of a cryptocurrency is artificially inflated and then deliberately crashed, are examples of such manipulation.
It's essential for individuals to conduct thorough research, understand the risks involved, and only invest what they can afford to lose when dealing with cryptocurrencies. Additionally, seeking professional financial advice and staying informed about market developments and regulations can help mitigate some of these risks.
Happy Wednesday and a very special Happy Thanksgiving week to all of you. This is Dr Currie Myers, America’s Criminologist, with this important criminal justice update for November 22, 2023.