“Rife with fraud, manipulation, and money laundering.” That’s a fair summary of how regulators, legislators, and other critics regularly describe crypto. Such claims are made so often that industry insiders seldom challenge them, and their reluctance to push back is understandable given high-profile scandals like FTX and TerraLuna. That, however, does not make the claims correct.
Crypto is a complex global ecosystem. It has operated in a legal and regulatory gray zone, but not for any nefarious reason. Its unique approach to ownership and settlement poses a challenge to rules written for a different kind of financial system. A more objective look shows that most of the activity labeled as crypto fraud is just regular fraud that happens to involve crypto. The vast majority of actual crypto activity is, and always has been, fine.
Bitcoin, a decentralized payment system powered by its own currency, is not a fraud. It has operated for over a decade and never harmed any of its users. If fraud is defined as deceptive behavior with the intent of financial gain, then the Bitcoin network has never recorded a single instance, despite moving tens of trillions of dollars in value for millions of users.
That’s a remarkable track record, and certainly better than many solutions offered in the realm of traditional finance, where fraud is so common that it often goes unreported. If crypto fraud is the occasional plane crash that gets the headline treatment, then bank fraud is the countless car crashes that kill far more people.
Bitcoin and Ether combine to make up two-thirds of all digital asset value, and neither project has ever committed fraud. Perhaps more important, the value moved across their blockchains—in Ethereum’s case, that includes thousands of other tokens—accounts for most on-chain activity. None of it has been fraudulent.
This point is so potent that it bears repeating: Most of the value held in crypto and almost all the value transferred via crypto has always been legitimate.
That’s not to say there haven’t been fraudulent tokens issued on top of Ethereum. The democratization of access that crypto represents has a notable downside, the ease of launching scams. But scam tokens have always been a small minority of digital assets.
But what about FTX? Sam Bankman-Fried’s creation was definitely a fraud, but it was not a crypto fraud. FTX was a financial intermediary that did bad things involving other people’s money. However, if a traditional bank or broker did the same thing—as many have—we’d blame the bank, not the money. Put differently, if the fraud committed by Bernie Madoff was not regarded as an indictment of the stock market, then the fraud at FTX has little meaning for crypto.
There is a long history of charismatic hucksters taking advantage of the excitement around new technologies to trick people. But at the end of the day, the shenanigans at FTX reveal as much about crypto today as the bad accounting at WorldCom did about the internet 20 years ago.
As for the other high-profile actions involving Coinbase, Bittrex, and Kraken, there are no fraud claims. All the claims are registration issues—a byproduct of the lack of regulatory clarity the industry has been seeking.
The situation is a bit thornier for Binance as the company took illegal steps to circumvent KYC and AML requirements—and has been accused of wash trading. While serious, these infractions could happen at any intermediary, and regularly do. Just this year, Wells Fargo agreed to a billion-dollar shareholders’ settlement over deceiving them about regulatory progress tied to its fake-account scandal—for which it paid a separate multibillion-dollar fine.
Binance has never been accused of misappropriating client funds, but it gets portrayed as being worse than a major bank that defrauded shareholders to cover up the severity of how badly it defrauded customers.
So why is crypto treated so harshly? Because its critics refuse to consider even the honest parts of the industry as legitimate. Bank accounts and internet access are obviously important, so the occasional spasm of bad behavior is tolerated. But crypto is supposedly just a solution looking for a problem, so every setback is amplified. This phenomenon also explains why any amount of illicit activity using crypto gets the headline treatment while the far larger sums that move through the banking system do not.
Those of us who believe in this new way of building trust see the positive uses, the list of which grows by the day. We’d love nothing more than for the authorities to focus on pursuing the relatively small number of scams as opposed to condemning the entire industry.
Brian Whitehurst is head of regulatory affairs and regulatory counsel at Lukka. Omid Malekan is an adjunct professor at Columbia Business School. The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
