Bitcoin has lost steam. But criminals still love it.

SAN FRANCISCO – The past few months have not been good for Bitcoin. The value of digital tokens has steadily decreased. Bitcoin trading on cryptocurrency exchanges has slowed down. And buy legal items with Bitcoin? That fell too.

But one corner of the Bitcoin economy is still going strong: the sale of illegal drugs and other types of violations of the law.

The amount of cryptocurrency issued in so-called dark net markets, where stolen credit card information and a variety of illicit drugs can be purchased with Bitcoin, rose 60 percent in the last three months of 2019 to a new high of 601 million U.S. dollar. A company tracks every Bitcoin transaction and advises a number of government agencies, according to data released by Chainalysis on Tuesday.

The continued growth in illegal transactions underscores the difficulty Bitcoin has had in overcoming its reputation as a haven for villains even though Wall Street institutions have begun to buy and sell digital tokens.

The continued success of the illegal activities powered by Bitcoin also hints at the struggles authorities faced to curb the new types of bad behavior made possible by cryptocurrencies.

Bitcoin has played a key role in the recent surge in so-called ransomware attacks, in which hackers steal or encrypt computer files and refuse to return them unless a Bitcoin payment is made.

Bitcoin continues to be popular with currency speculators, and illegal activity only accounts for 1 percent of all Bitcoin transactions. But that has almost doubled compared to the previous year. According to Chainalysis’ new Crypto Crime Report, illegal activity appeared to be one of the few parts of the Bitcoin economy that is insensitive to price changes.

Chainalysis data likely underestimates the number of Bitcoin transactions used for illegal purposes as the company is unable to identify some of the activities related to ransomware, tax evasion, and money laundering. It is widely believed that some of the people who buy Bitcoin on legitimate trading exchanges do so in order to circumvent national laws.

This illegal activity is “ubiquitous,” said Calvin Shivers, assistant director of the FBI’s criminal investigation department. However, he added that the FBI had “stood firm” and “used up resources” to address the problem.

In addition to online black markets, authorities have aggressively targeted cryptocurrency schemes. But the amount of Bitcoin going into fraudulent activity still hit a new high. Chainalysis data shows that scammers more than tripled their revenue from the previous year and stole $ 3.5 billion from millions of victims in 2019.

Illegal transactions have been a central part of Bitcoin history since the first online black market, the Silk Road, gave people a reason to use Bitcoin in 2011. Bitcoin was useful for the Silk Road as the structure of Bitcoin was not central to the authority allowing a user to create a Bitcoin wallet and use the tokens without registering an identity with anyone.

[What is Bitcoin, and how does it work?]

Some in the Bitcoin community hoped that cryptocurrency would find wider use than electronic money, as the inventor of Bitcoin originally postulated.

As Bitcoin’s value rose, big companies like Expedia and Stripe announced they were taking in Bitcoin. However, when users found that Bitcoin had many drawbacks to making purchases – slower and more expensive than traditional cash, for example – there was little adoption.

Bitcoin lovers now believe that cryptocurrency is more useful as a new type of alternative asset like gold. Lots of people on Wall Street have embraced this idea, and the Chicago Mercantile Exchange and the owner of the New York Stock Exchange allow traders to buy and sell bitcoin-based derivatives. However, the trade was lukewarm.

Some believed that the digital token could prove popular in countries like Venezuela or Argentina, where local currencies are even less stable than Bitcoin. But interest in these places has recently declined, as shown by data from research firm Block.

Bitcoin prices and trading rose in the middle of last year, shortly after Facebook announced its intention to create the Libra cryptocurrency. The price of Bitcoin rose from around $ 4,000 to over $ 12,000. However, it has become clear that Libra may have as many legal troubles as Bitcoin. The price of a Bitcoin was recently $ 9,000.

Even with the recent declines, Bitcoin trades and prices are still well above what they were in early 2017, before Bitcoin rose to nearly $ 20,000.

Bitcoin advocates generally weren’t concerned about the amount of illegal activity being done with Bitcoin because they see much larger amounts of illegal activity with traditional currencies and because Bitcoin has significant disadvantages for criminals.

“Bitcoin is still a pretty lousy cybercrime currency,” said Ryan Selkis, founder of cryptocurrency consultancy Messari. “Maybe it’s good for petty crime, but if you’re running a cartel it’s a different story.”

The ledger of all Bitcoin transactions, known as the blockchain, publicly records every transaction. Bitcoin addresses are not assigned names, but companies like Chainalysis have tracked criminals by tracking transactions over the blockchain to places that know the identity of their users, such as B. Bitcoin exchanges.

Some new dark network markets have pushed customers to use alternative cryptocurrencies that leave fewer traces. But criminals don’t seem to be deterred by the disadvantages of Bitcoin. The proliferation of fentanyl, which is blamed for the opioid crisis in the US, was made possible by Chinese laboratories selling the drug online for Bitcoin, according to law enforcement agencies.

One of the new black markets that has become popular over the last year, Empire Market, has multiple pages of listings for fentanyl in various forms, from 12 grams for $ 1,600 in Bitcoin to a patch for $ 41. Almost all of the new websites have long sections on why, despite Bitcoin’s drawbacks, they remain the place to buy drugs online.

“We welcome all honest vendors who want to settle here. There is really no reason for you not to sell on Monopoly,” explains the marketplace called Monopoly on its support page after explaining the steps it has taken to avoid the fate of previous markets.

Comments are closed.