When I look at the cryptocurrency economy vs a regulated economy, it's almost night and day in terms of criminal activity. The crypto world is rife with scams, schemes, extortion, fraud, etc. Why do crinimals choose to use cryptocurrency if AML/KYC is so ineffective?

I also think this is an extremely dangerous thing to be wrong about. Look at how international war is waged these days: it's primarily economic. Consider the carnage that defined human existence before WWII[1].

I would argue that a big part of the reason all of our lives are so violence-free now is that nation-states fight over abstractions for power rather than physical power. If it becomes impossible for countries to sanction each other because we've torn down the AML/KYC apparatus, will the world plunge back into physical warfare?

Unfortunately, I believe this idea has really taken hold lately because owners of crypto are incentivized to believe it. It's pretty hard to convince someone of the dangers of something they're benefiting from financially. I don't think this is an exception.

[1] https://www.youtube.com/watch?v=DwKPFT-RioU