Columbia Business School Professor Austin Campbell said that Binance, the largest cryptocurrency exchange globally, has relatively few criminal activity issues compared to traditional financial institutions. He attributed this to the nature of blockchain technology, which he said makes it difficult for criminals to use cryptocurrencies. Campbell shared his views in a post on X dated September 28.
"From 2022 onwards, I believe Binance began to get religion on the AML issues," said Campbell. "Today, when you look at criminal activity on the blockchain, although Binance still has some problems (no shock, they are the largest exchange by far, Binance not having problems would be like the combination of JPM + BofA + Wells Fargo all not having problems), they are probably at or below their 'fair' share of criminal activity and certain other offshore exchanges (and banks) are a far greater problem with regard to criminal activity. In addition to the forensics firms (TRM, Chainalysis, Elliptic), we also have increasingly good intel techniques in the space pioneered by @inca_digital to catch bad actors. Soon, we will be reaching the point where transacting on blockchains is absolute poison for criminals compared to the traditional financial system, if we have not crossed that point already."
According to CoinTelegraph, Changpeng Zhao (CZ), co-founder and former CEO of Binance, was released from prison on September 27 after serving a four-month sentence. This followed his guilty plea in November for failing to implement adequate anti-money laundering (AML) controls when Binance was launched. As a result, Binance paid $4.3 billion in penalties for AML violations, while CZ paid an additional $50 million fine and resigned as CEO.
Jane Khodarkovsky, a former Human Trafficking Finance Specialist with the Department of Justice, highlighted during a hearing that blockchain's traceability allows law enforcement to track criminals using cryptocurrency for illicit activities. "What I found as a prosecutor—and my experience is not unique—is that when criminals turn to digital methods, they actually leave breadcrumbs for investigators to follow," she said. Khodarkovsky explained that blockchain analytics enable investigators to trace money in ways not possible with traditional payment systems.
Dr. Andrzej Gwizdalski from the University of Western Australia analyzed data from the United Nations, World Economic Forum (WEF), and blockchain analytics firm Chainalysis. According to Oodaloop, he found that "Traditional fiat, like the USD, is implicated in an estimated $3.2 trillion in illegal activities annually—over 100 times the $20 billion linked to cryptocurrencies." Gwizdalski remarked that using crypto for illegal purposes is risky due to every transaction being transparently recorded.
A violation tracker by Good Jobs First indicates that major financial institutions such as Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo have incurred billions in penalties for violations including sanctions breaches and AML deficiencies. Since 2000, Bank of America alone has been fined $41.33 billion for 156 violations ranging from economic sanctions breaches to investor protection violations.
Campbell has served as an adjunct professor at Columbia Business School since 2022 and previously held positions as chief risk officer for Paxos and co-head of Digital Assets Rates Trading at Citi.
