Usage by Criminals and Terrorists
Note: Data in this section last updated July 3rd, 2022
Several of the core benefits of DAOs could also be seen as weaknesses. The fact that they allow anonymous individuals to form organizations that exist outside of the traditional financial and legal system could be a recipe for disaster. Indeed, critics argue that DAOs are the ideal venue for:
Tax Evasion: Because cryptocurrency transactions are anonymous, people could structure DAOs to evade taxes
Criminal Activity: Transactions can’t be regulated, which means that criminals could create DAOs to sell drugs or weapons
Funding Terrorists: Terrorists groups could theoretically form a DAO to receive funding and distribute it to members.
While all of these are definitely possible – and even seem logical at first blush -- the data simply doesn’t support these fears. In fact, only 0.15% of all cryptocurrency transactions are connected to criminal dealings.
Illegal Activities Represent Only 0.15% of Cryptocurrency Transactions
A big part of the reason for this is probably because cryptocurrency transactions aren’t anonymous, they are “pseudonymous” – meaning that if anyone can tie you to your address, they can see all of your transactions. This has proven a boon time and time again to law enforcement, who have used the transaction history to track down several high profile thieves. In 2022 alone, the Department of Justice seized $3.6 billion from crypto hackers.
Ironically, given the fact that all transactions are recorded forever on a digital ledger, cryptocurrencies may ultimately reduce crime, fraud and tax evasion.
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