Federal Reserve President Neel Kashkari has criticized cryptocurrency, stating that most transactions are linked to illegal activities. Speaking at a Wisconsin town hall event, Kashkari claimed that most crypto is used for drug buying or funding illicit activities.
This follows his previous skepticism towards digital currencies, including Bitcoin, and his questioning of their usefulness. Kashkari's remarks sparked an immediate backlash from crypto supporters, including industry leaders, for retweeting outdated narratives.
Following Kashkari's public statements, several prominent personalities in the crypto industry voiced their displeasure. The first response came from Nic Carter, a partner at Castle Island Ventures. On X, Carter denounced the Federal Reserve president's comment, adding that misleading information should not be tolerable from a top financial regulator.
Meanwhile, Hailey Lennon, a legal analyst and partner at Brown Rudnick, countered Kashkari's claims on X. According to her, legitimate crypto projects use more stringent anti-money laundering measures than physical cash and, therefore, are less likely to be used for illegal activities. Lennon said the misunderstanding of cryptocurrency as a conduit to illegal activity has persisted for over a decade despite attempts to put it to rest.
While Kashkari states that nearly 20% of cryptocurrency transactions are associated with criminal intent, firm Chainalysis proves otherwise as per a report they published in January 2023, only 0.34% of all crypto transactions in 2022 were associated with Illegal activities, where they have seen a sharp decline from previous years. The report also reported that the highest rate of illicit transactions was recorded in 2019 at a rate of 1.29%, demonstrating that the criminal use of Crypto has declined.
The finding contradicts the narrative embraced by Kashkari and other crypto doubters like Senator Elizabeth Warren and Congressman Brad Sherman, who have repeatedly raised these concerns.
Kashkari has been critical of cryptocurrencies in the past. In 2020, he said they were worse than a 'giant garbage dumpster' and is actively involved in calling Dogecoin a pyramid scheme.
In May this year, Kashkari expressed his doubt about Bitcoin's efficiency, stating that it cannot serve its purpose as money or an accessory asset. He also dismissed the idea of CBDC and other cryptocurrencies and referred to them as another payment system like Venmo. His comments come as institutional interest in crypto increases. A 2024 poll shows that 80% of wealth managers intend to increase their exposure to digital assets.