After a tough two years, the crypto market has picked up as investors again begin to gravitate toward the volatile yet extremely appealing asset class. Bitcoin and Ethereum have led the way, with the former recently topping its all-time high. This article reminds readers of some cryptocurrencies that were once highly controversial, and new ones are just as scandalous. Here is a list of the most controversial cryptocurrencies in history.
1. Arkham
Our list of the most controversial cryptocurrencies starts with the altcoin Arkham (ARKM), which Coinbase just announced an intention to list. The ARKM token will run on the Ethereum Mainnet. The exchange issued a warning on X that holders might lose their tokens if they use other blockchains.
Trading of the controversial cryptocurrency started around UTC 16:00 on April 2, according to an official announcement.
Arkham is one of nearly three dozen Binance Launchpad projects, and it has sparked a great deal of controversy. The distribution mechanism behind ARKM tokens mainly involves giving users an incentive to reveal the identity of addresses that should preserve anonymity in a block. This makes ARKM one of the most controversial cryptocurrencies ever because the crypto community values anonymity very highly. Indeed, it's one of its main tenets.
Despite the opposition, Arkham gained traction after launching on Binance's platform, revealing who stood behind numerous crypto addresses that unidentified entities held.
2. Tether
Bankless Times recently reported the prevalence of 24/7 currency exchanges in the Cambodian capital of Phnom Penh, which offer to swap yuan for Tether (USDT). Tether got a reputation as a controversial cryptocurrency after emerging as the asset of choice for transferring illegal funds in and out of Cambodia. Chinese nationals also use the stablecoin to gamble and cash out proceeds from regional cyber scams, making it the second-most controversial cryptocurrency on our list.
Cambodia banned cryptocurrencies in 2017, including stablecoins, but they remained an essential element of the country's shadow economy, according to insiders. This is because of the low trading fees and the absence of limitations on the ways to transfer, conceal, and launder money, which can happen at lightning speed.
Facilitating the cyber scam industry
Tether is a controversial cryptocurrency because it is very popular in Cambodian casinos, which are full of Chinese customers evading gambling bans in mainland China. Most illegal online gambling sites operating from Cambodia accept cryptocurrency as well. Cambodia's cyber scam industry is worth billions. Its hubs are casinos in Phnom Penh and the areas bordering neighboring countries such as Thailand, Vietnam, and Laos.
In November last year, the US Department of Justice traced and confiscated assets worth almost $9 million linked to online scam victims. This happened after the authority probed accounts with Tether Holdings, the company behind Tether. The issuer of the controversial cryptocurrency froze another $225 million separately in connection with pig butchering scams perpetrated by people in Southeast Asia.
Despite Tether's efforts, which represent the biggest stablecoin freeze ever, USDT hangs on to its reputation as a highly controversial cryptocurrency.
3. Binance Coin (BNB)
BNB became a controversial cryptocurrency after it emerged that Binance, its issuer and the largest cryptocurrency exchange in the world, was facing enforcement action from a number of regulators, including the omnipresent US Securities and Exchange Commission. The enforcement action mainly targets Binance's US-based subsidiary, Binance US.
The SEC charged Binance and its CEO, Changpeng Zhao, for violations of unregistered securities. There are indications that the controversial cryptocurrency BNB was actually a security. Zhao will stand trial on April 30. He has been charged with failing to maintain an anti-money laundering program at his exchange.
Binance paid a record fine
CZ pled guilty to the charge as part of a bigger deal with US authorities that also saw Binance paying a fine of $4.3 billion and him stepping down as CEO of Binance. The effect on the controversial cryptocurrency was imminent, but it has reversed losses since.
Fortunately for Binance's ex-CEO, the maximum sentence for his crime is only a year and a half in prison. Sam Bankman-Fried was not so lucky. Interestingly, Zhao was SBF's first investor, and some believe he played a big role in bringing the ex-FTX CEO down. When FTX went insolvent at the end of 2022, Binance offered to buy the exchange, which it had initially nurtured. CZ announced there was a letter of intent, but ultimately, the transaction did not go through.
Trial outcome is highly anticipated
How does all this make BNB a controversial cryptocurrency? The outcome of the trial is expected to impact the price of BNB - not just the trial of Zhao, but also the case against the exchange itself. Another difference to SBF's case is that Zhao is not in jail – he was released on $175 million bail. He was not allowed to leave the US, though.
In the charges against Binance, prosecutors describe how the exchange allowed people to open accounts with just an email address as long as they only carried out transfers in cryptocurrency. In other words, they had to make deposits and withdrawals in cryptocurrency. There were some withdrawal limits, but they were easy to get around.
Binance began tightening KYC procedures in 2017, but according to authorities, it was too little, too late. Despite its ranking as the fourth-biggest coin by market cap, BNB remains among the most controversial cryptocurrencies.
4. Worldcoin
Soon after its launch in July last year, Worldcoin rapidly lost gains against the backdrop of escalating concerns. These surrounded the project's security, privacy, and financial backing. Cofounded by OpenAI's Sam Altman, Worldcoin used hardware called Orbs, which could prove someone was human by means of an iris scan.
The controversial cryptocurrency was marketed based on the ability to identify people that way, which was to be a crucial part of a new digital economy in the AI era. Users who underwent Orb verification were rewarded with WLD tokens.
Community leaders like Ethereum creator Vitalik Buterin warned about possible abuses of the controversial cryptocurrency's ecosystem, expressing concerns about security, privacy, and centralization. Worldcoin was most heavily promoted in Africa and South Asia, where around 60% of verified Worldcoin users were located as of mid-2023. The promotions in these developing regions raised concerns about exploitation, adding to Worldcoin's reputation as a controversial cryptocurrency.
SBF provided financial backing
What's more, financial backing was a problem. Worldcoin received an investment from Sam Bankman-Fried in its Series A funding round in October 2021, before anyone knew FTX was in trouble.
The controversial cryptocurrency came under fire for its initial amount in circulation, which was deemed to be too low. According to the whitepaper, the total supply will be 10 billion WLD in the next decade and a half. At launch, just 143 million WLD was in circulation.
Finally, the token had no real use case as of last year. This has led the community to consider it a largely speculative investment tool.
5. Squid token
Who could forget the Squid token, the controversial cryptocurrency par excellence? In fact, ranking it as one of the most controversial cryptocurrencies doesn't do it justice: it was one of the greatest rug-pull scams. For those who don't remember 2021 that well, Squid was a token inspired by the Korean Netflix show Squid Game, which was to be used as payment in a "play-to-earn" game. The token actually had nothing to do with the show.
Squid token was created by savvy developers, who drove up publicity around it on Discord, Telegram, and other popular media. The price skyrocketed – from a penny to almost $3,000 per token in less than a week. In a classic rug pull, the developers waited for substantial funds to pool, then withdrew them, making away with an estimated $3.38 million and leaving people with nothing but a highly controversial cryptocurrency on their hands. The value of the token plummeted to zero.
You can still get in on it!
A number of variations of the controversial cryptocurrency are still available for trading on decentralized exchanges, such as Squid Game, Baby Squid Game, Squid Game 2, SquidGrow, etc. They are worth fractions of a penny. CoinGecko warns that the tokens are not connected to the popular Korean reality show in any way.
The irony is not lost on us: the dystopian program pits participants against each other in a deadly contest capitalist overlords orchestrate. Experts did warn against investing in Squid, pointing out it had all the makings of a scam, but investors still rushed in.
6. Omicron
This controversial cryptocurrency had its opportune name choice going for it all the way. In some cases, cryptocurrencies don't have to piggyback off of hype. Many of the innumerable cryptocurrencies on the market lurk in the shadows and abruptly get their time in the spotlight. This is exactly what happened with Omicron, an obscure crypto project that launched just weeks before researchers reported the eponymous new strain of COVID-19.
The controversial cryptocurrency Omicron held no significance apart from its name. It launched in 2021 on the DEX SushiSwap and was available for trading only there, which is still the case. It was changing hands for around $70 before the WHO announced the new COVID variant.
The controversial cryptocurrency's value started skyrocketing amid news reports on the new global health threat. The coin gained 900%, hitting an all-time high of $711 in November. By December 2021, the controversial cryptocurrency's value had dropped to $100. It still exists, and you can exchange it for USD Coin on SushiSwap. One Omicron is worth 1.17 USDC resp. $1.17, as USDC is a stablecoin.
At the time, some members of Crypto Twitter saw Omicron's advent as a sign that we were all in a giant bubble. Others warned that it might be a scam. In fact, its value spike was just a coincidence.
The main conclusion was that the value of crypto tokens is often arbitrary and as hard to predict as the next COVID-19 strain. This randomness makes for controversial cryptocurrencies.
7. The Venezuelan petro
In January this year, Venezuela ended support for its highly controversial cryptocurrency, the so-called petro. It was introduced by President Nicolas Maduro in 2018 to bypass US sanctions, but it never took off.
The petro could only be traded on Patria, a platform that shuttered on January 15. All remaining petros were converted to bolivars, the local currency.
The controversial cryptocurrency initially seemed promising. It was backed by Venezuela's vast petrol reserves, the largest in the world. When it launched, it cost $60 per unit.
The president believed it would allow "new forms of international financing." However, it faced a number of insurmountable challenges. First, people didn't understand how to use the controversial cryptocurrency. Risk rating agencies declared it a scam. In 2020, the president ordered airlines to use it to pay for fuel to revive it. Venezuelan police handed out traffic fines in the controversial cryptocurrency, but it couldn't be used to pay them.
The final straw that put an end to the controversial cryptocurrency was a corruption scandal last year, which involved issues with managing funds from oil transactions in cryptocurrency. Ultimately, the Venezuelan oil minister resigned, and multiple officials were arrested, including the top brass of Sunacrip, the national crypto regulator.
The most controversial cryptocurrencies: wrap-up
There will be more controversial cryptocurrencies as long as this asset class exists. In fact, cryptocurrencies are more likely to attract controversy than any other asset class due to the market's inherent volatility and decentralization, which lets all kinds of actors in. Some of them have absolutely no qualms about bringing controversial cryptocurrencies to market – after all, demand is demand, no matter how it is generated.
What was once a controversial cryptocurrency can gain legitimacy and vice versa, so it wouldn't be wise to stay away from all such assets as a matter of principle. Always exercise caution before investing, and thank you for reading our article about the most controversial cryptocurrencies in history!
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