Crypto: Scam or Salvation?

To some crypto is the second coming. To others it’s an environmental disaster designed for scams and illicit activity. Let’s look at what the data says.

What happens on the blockchain?

Crime: <0.15%

Criminal activities backed by cryptocurrencies include fraud, ransomware, scams, bypassing international sanctions, theft, money laundering, and various illicit activities on the dark web. This amounted to an estimated $51 billion in 2024, slightly up from the year before, or a mere 0.14% of the on-chain transaction volume. Stablecoins are the preferred asset for such activities, followed by Bitcoin, Ethereum, and altcoins.

Money laundering is relatively small (0.06%), because cashing out large amounts in fiat currency triggers anti-money laundering (AML) checks at banks who are required to “know your customer” (KYC). KYC is also nowadays done at major centralized exchanges (CEXs). Criminals therefore still prefer trade-based laundering, shell companies, invoice fraud, and cash smuggling, which leave fewer traces, because there is no public ledger. Illegal exchange-to-exchange transactions are indistinguishable from legitimate transfers without additional information. Money laundering may therefore be higher than reported. Networks that specialize in money laundering do exist, which shows that there is a market for it.

Consequently, crypto is not all about crime, as some claim, but it is sufficient to fund entire cybercrime economies. North Korea even pulled off a $1.5 billion crypto heist recently with a total tally of $6 billion. Compared to illicit activities backed by traditional fiat currencies, crime using crypto is still tiny.

Retail: <0.2%

Retail-sized transfers hover around 5% of global crypto volume across regions. There are only a little over 15,000 bricks-and-mortar businesses that accept payments in crypto and fewer than ten million e-commerce stores worldwide. That is less than 0.2% of merchants globally. What is more, most people who spend crypto today swap coins back to fiat at checkout, paying a 1% processor fee. That undercuts the typical 2% card fee if both merchant and customer stay on-chain.

Note that what is tagged as retail includes peer-to-peer transactions and small trades with a value under $10,000. This is not just retail at check-out; based on the share of shops that accept cryptocurrencies, we can estimate that figure to be 0.2%.

Remittances: <0.1%

Cross-border remittances are becoming more popular, especially among migrant workers who send money back home to their families. The key areas for remittances are Latin America, particularly Mexico, Africa, particularly Nigeria, and a few others, such as Ukraine and Philippines. More on Ukraine in a bit.

Activism: <0.001%

Since 2022, $230 million in crypto were donated in the Russo-Ukrainian war. There are also programmes related to Planned Parenthood, Israel, Palestine, Iran, and so on. That’s a drop in the on-chain transaction volume bucket, though.

Wash trading: <0.01%

Wash trading is when a trader buys and sells the same financial instrument to create the false impression of market activity and increase the appearance of liquidity, which rewards exchanges. Essentially, the trader moves it from the left pocket to the right. Overall, it accounts for $2.57 billion.

Organic and inorganic speculation: 85–95%

Out of a transaction volume of $36.4 trillion, the vast majority of crypto volume is associated with trading and speculation on exchanges. That said, “inorganic activity” accounts for the majority, with institutional activity (≥$1m) accounting for 55–70% and professional ($10k–$1m) for 25–35%, depending on the region. Institutional activity includes, among others, exchange rebalancing and OTC block trades.

This is not unusual. The traditional financial system also has a lot of rebalancing going on. Fedwire funds are about $1.1 quadrillion per year, which is a settlement system operated by the US Federal Reserve Banks that facilitate the electronic transfer of funds between financial institutions. For comparison, the US GDP is only $28 trillion, so more than an order of magnitude smaller.

Bots account for 90% of the on-chain transaction volume for stablecoins, which account for two-thirds overall. That means 60% of all transactions on the blockchain are initiated by bots, which excludes service-to-service transfers (i.e. back office). While that sounds like a lot of spam, these bots can perform legitimate activities such as arbitrage or liquidity provision. So, about 30% is true speculation.

Back office: 5–15%

Inter-service transfers are the back-office housekeeping needed to keep the system going: hot/cold wallet rotations (to keep customers funds mostly offline for security), deposit consolidation (to cut fees), and so on. These are sometimes also referred to as inter-service flows, internal transfers, or exchange wallet management. In inter-service transfers cryptocurrency does not change hands.

What happens off the blockchain?

The exact extent of on-chain speculation is already hard to estimate, as so much is inorganic activity. A lot of trading also happens on centralized exchanges (CEXs) not public blockchains. This is because centralized exchanges have lower transaction fees than decentralized exchanges (DEXs) and they tend to be faster per order, which is needed for high-frequency trading (HFT). They also provide an easy means of access to cryptocurrencies with logins and passwords as opposed to self-managed keys.

Wash trading is prevalent on CEXs, though. For Bitcoin, as much as 95% is wash-traded. For NFTs, wash trades account for 60% of value on marketplaces such as LooksRare, Blur, and OpenSea.

Environmental ledger

Energy

Bitcoin’s proof-of-work protocol requires at least 180 TWh annually. 52% of that comes from renewable sources. A 99.95% energy cut is possible with a proof-of-stake protocol, as Ethereum has shown. With a price of at least $0.06 per kWh of electricity for businesses, that amounts to $10.8 billion of electricity costs per year, paid for by the miners.

Carbon

Each kWh emits, in the best case, 154 g of CO₂, which translates to 28 million metric tons for Bitcoin alone. The social cost stands at $223 per metric ton in today’s dollars or $6.2 billion for Bitcoin alone.

Please note that the global average of carbon dioxide emissions is 426 g of CO₂/kWh in 2025, which yields 77 metric tons. With that average, we end up with $17.2 billion in environmental damage from carbon dioxide alone.

Electronic waste

The environmental bill is paid for by society, not the miners. The same goes for other externalities, such as noise for residents near cryptomining facilities and e-waste. Noise is hard to quantify in monetary terms, but we can look at e-waste’s social cost, which is priced at roughly $5 per kilogram and much lower than the treatment cost, which does not include negative health implications, damage to ecosystems, and climate externalities. The ASICs needed to mine Bitcoin last only 1.3 years, and every year about 30,700 metric tons of electronics go to waste. These contain toxic heavy metals and rare-earth minerals that leak from landfills. The annual social cost from e-waste is therefore $154 million.

What measurable societal value is actually returned? It is mostly in terms of reduced fees. Global remittances are $685 billion with an average fee of 6.62%. If all were to move to crypto at 1% today, we find savings of $38.5 billion. That is roughly the same as the entire cryptocurrencies remittances market as of now. So, the actual annual benefit of savings from remittances in cryptocurrencies is around $2 billion. That is well below the total cost of $17.2–$28.2 billion with the social cost alone accounting for $6.4–$17.4 billion. The remittance market must grow by an order of magnitude to offset the costs.

Crypto vs legacy

There are more than 25,000 cryptocurrencies, while there are a bit more than 150 fiat currencies. It is hard to believe that so many cryptocurrencies are needed or add any value to the economy or society.

In terms of fraud recovery, the legacy system still performs better than the blockchain. Banks and card issuers refund and absorb more than $33 billion in fraud. Self-custody wallets have no safety net at all.

Banks also have deposit insurance. In the US, the FDIC backs $10.6 trillion of deposits up to $250,000 per account. No such insurance exists for crypto.

More than 150 million merchants accept Mastercard and Visa. For cryptocurrencies there are a few thousand.

The balanced verdict

So, is crypto just for capitalists to get rich and screw the rest of us? Well, it is neither a panacea nor a Ponzi scheme. It solves niche but real problems: cheap 24/7 cross-border remittances, inflation hedging, and censorship-resistant crisis aid.

Its use in retail is questionable: actual retail, as it is commonly understood, accounts for less than 0.2% of the transaction volume on the blockchain. Furthermore, cryptocurrencies are neither faster nor easier to use than cash, cards, or digital payments. The settlement can be faster than the typical one-day delay for card issuers, but if there is a conversion to fiat it depends on the off-ramp, so in practice blockchain transactions are not faster. The Lightning Network is instantaneous and with almost no fees, but still very niche with a capacity of $450 million. Crypto can be cheaper, but the 1–2 percentage points difference with Visa and Mastercard do cover losses from fraud and rewards schemes. Transactions in cryptocurrencies are irreversible and without consumer protection. What is more, merchants as well as customers often have to pay extra to convert between fiat and cryptocurrencies. Volatility in cryptocurrencies can also make the swipe fee surcharge negligible.

Speculation and energy use still outweigh productive flow by most measures. About 60% of the on-chain transaction volume of $36.4 trillion are driven by bots. That leaves 40% for economic activities such as speculation, retail, remittances, and financial infrastructure. Less than half a percent of transaction value is retail and remittances, and 30% is pure speculation.

Scams, heists, scandals, and the like abound:

• FTX’s $8 billion gap
• Argentina’s $4.6 billion scandal that involved Javier Milei
• Bitconnect’s $2.4 billion scam
• Bybit’s $1.4 billion hack
• HyperVerse’s 1.3 billion Ponzi scheme

The key question is whether real usage can grow tenfold without increasing fraud and emissions an order of magnitude too? If Bitcoin were to switch to a proof-of-stake protocol, the environmental impact would be reduced massively. That appears improbable though.

Until blockchains move more real value rather than hype, and do it with less carbon, crypto stays closer to scam than salvation.