The Pandora Papers show the value of Bitcoin and Co.


The Pandora Papers revealed how wealthy people hide taxes from the tax authorities. At the same time, the data leaks underpin the value of cryptocurrencies as a transparent means of payment.

It is one of the greatest journalistic coups in history, the research network International Consortium of Investigative Journalists (ICIJ) succeeded. Thanks to a data leak of 2.94 terabytes, 600 journalists were able to view around 12 million documents from a total of 14 offshore service providers. Companies that specialize in this are mostly extremely wealthy Assist clients in tax avoidance, tax evasion and in some cases even money laundering. The Pandora Papers made about 29,000 cases known in which assets were concealed.

The clientele of these companies includes the who’s who of celebrities: from singer Shakira to former British Prime Minister Tony Blair to rulers like the Jordanian King Abdullah II or the authoritarian President of Azerbaijan Ilham Aliyev. Through company networks, they are said to have invested their assets in real estate around the world, among other things.

The first consequences from the Pandora Papers were already apparent in the Czech Republic. In the middle of the parliamentary elections, it became public that Prime Minister Andrej Babiš should have bought a castle in France through a complicated company structure. The process was interesting in that Babiš denounced his predecessor for such methods. The electorate then punished the 67-year-old in the parliamentary elections and gave the opposition a clear majority.

Regulatory agency narrative crumbles through the Pandora Papers

Of course, you have to make a clear distinction between tax evasion and tax avoidance. While the former is clearly a violation of the law, the latter is morally reprehensible, but not illegal. Nonetheless, the Pandora Papers show the double standards that individual political actors display when it comes to paying taxes. Especially when you consider how those people in other areas, such as the crypto market, use arguments about money laundering or tax evasion in order to criminally frame the opportunities that this presents. US Treasury Secretary Janet Yellen said in February:

Misuse of cryptocurrencies and virtual assets is also a growing problem. I see the promise of these new technologies, but I also see the reality: cryptocurrencies have been used to launder the profits of online drug dealers; they were a tool for financing terrorism.

US Treasury Secretary Janet Yellen

It is perfectly clear that a burgeoning market needs a solid framework within which to operate. Not least to convince the majority of society of its benefits and to protect investors from fraud. Of course, it is currently still possible to disguise taxes using Bitcoin and Co., because the options for tracking by the authorities are currently still limited. Here, however, states are already arming. Of the Internal Revenue Service (IRS) in the US called for a $ 1.2 billion budget increase in early June to create crypto-savvy staff and new tracking tools, among other things. For President Biden’s infrastructure program, taxes from cryptocurrency transactions are an important financial pillar. And the EU recently founded a new anti-money laundering unit (AMLA) with a focus on crypto transactions. At the same time, the same institutions lose huge amounts of fiat money every year.

However, given the extent of the Pandora Papers, the criminal narrative of government institutions towards cryptocurrencies seems to be crumbling. It is true that one cannot say with certainty how high the proportion of evaded taxes in the crypto space actually is – but it can determine the proportion of illegal crypto transactions.

Share of criminal crypto transactions will decline in 2020

Chainalysis published a report in February in which the analysis company compared the proportion of criminal crypto transactions with the total volume of all transfers in space. Overall, the US company recorded a 0.34 percent decrease in all illegal transactions, about $ 10 billion. With regard to money laundering, the threads came together with a few providers that the authorities were supposed to combat in a targeted manner.

Share and volume of illegal crypto transactions from 2017 to 2020, Chainalysis Crypto Crime Report 2021.

If you compare these numbers with the sums that are stored in offshore accounts, it becomes clear what authorities should increasingly focus on. According to estimates by the Tax Justice Network, an NGO dedicated to the fight against tax fraud, the volume that governments lose annually to tax avoidance and tax evasion is $ 427 trillion. Opposite to Fortune CEO Alex Cobham estimated the share in offshore accounts at up to 32 trillion US dollars. This is currently 32 times the market capitalization of Bitcoin and almost 16 times the market capitalization of the entire crypto market.

In addition, they gave FINCEN files an indication of how well-known banks helped dodgy customers launder funds. The leak brought a volume of almost 2 trillion US dollars to the public.

Bitcoin and Co. benefit from the Pandora Papers

But what positive things can you take away from the Pandora Papers for the crypto space? It is one thing above all – transparency. While the offshore webs of the super-rich are difficult to look through for regulatory authorities, with Bitcoin all transactions are stored in the network. Everyone can see it. With the help of on-chain tracking programs, with a little hard work you can track every payment. In addition, the KYC requirements of most crypto providers nowadays meet international standards. From this point of view, the fear of some regulators that cryptocurrencies would bring offshore methods for everyone is simply wrong. What rich people have achieved with the help of offshore companies and dodgy banks cannot be replicated by the simple average citizen using cryptocurrencies.




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