# Crypto assets pose a risk to the state

Crypto assets exist for a single purpose: [regulatory arbitrage](../concepts/regulatory-arbitrage.md). Effectively to undermine the rule of law and circumvent controls that nation states have put in place to safeguard the public and protect their economic interests. These include controls like [sanctions enforcement](../concepts/sanctions-enforcement.md), [know your customer](../concepts/kyc.md), [anti-money laundering](../concepts/aml.md) and [counter-terrorism financing](../concepts/ctf.md). 

Dark flows of crypto assets outside of the regulatory perimeter undermines these controls by allowing criminals to circumvent the law and engage in [illicit financing](../concepts/illicit-financing.md) and avoid law enforcement controls. This undermines the rule of law and the capacity of the state to protect its national interests.

While crypto assets don't pose an *existential* threat to the state per se, they do enable crime and undermine policy which weakens trust in democratic institutions and threatens the way of life for law-abiding citizens.

## References
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1. ‘Guidance on Cryptoassets’. 2019. Financial Conduct Authority. https://www.fca.org.uk/publication/consultation/cp19-03.pdf#page=11.
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