The Illegal Side of Cryptocurrency
Ivan Silkin
Chain 1: Introduction
The illegal side of crypto is surprisingly small. Illicit transactions in 2021 amounted to only $14 billion, which is 0.15% of total cryptocurrency transactions, according to Chainalysis. This is around a 75% decrease from 2020. Generally, there has been a decline in crypto-related crime, but 2022 was an outlier. Last year, the US and Europe sanctioned many high-profile Russians and Russian companies. This led to illicit transactions increasing by 100,000 fold. As a result, total crypto transactions for 2022 fell compared with 2021, but illegal transactions increased.
Chain 2: Illegal uses of cryptocurrency
There are many illegal uses of cryptocurrency. Here are the common ones with examples:
• Money laundering – a cross-chain bridge, RenBridge, has been used to launder at least $540 million.
• Fraud – Bitcoin Savings & Trust, which involved a fake ICO, managed to steal 265,000 bitcoins.
• Cybercrime – In March 2022, hackers gained access to the Ronin network, which backs Axie Infinity. As a result, $625 million of Ethereum and USDC was stolen.
• Terror funding – in 2020, the US Department of Justice confiscated $2 million worth of cryptocurrency from terrorist organizations in the middle east.
Factors of cryptocurrency that open up a path to crime include:
• Anonymity – personal information is not shared in crypto transactions.
• Decentralization – transactions happen independently, meaning the law cannot easily track crypto transactions.
• Speed – transactions usually take minutes which makes the transfer of money extremely efficient.
Chain 3: Cryptocurrency on the dark web
The dark web is a part of the internet that is untracked and unmonitored. It is infamously known for being a place where illegal trade happens. One of the most famous marketplaces was the Silk Road, which was shut down by the FBI in 2013 and at the same time, the founder was arrested. Since then, multiple versions of the marketplace have been put up again.
Cryptocurrency purchases are the only choice on the dark web due to their anonymity and speed. The most common purchasable items are weapons, drugs and information. Furthermore, a large amount of Human trafficking also happens on the dark web. An article for further, slightly disturbing information can be found [here](https://onebread.org/blog/2021/3/15/the-darknet-a-safe-haven-for-human-trafficking#:~:text=This platform is widespread throughout,purpose of trading child pornography.)
Chain 4: The most infamous crypto scam
OneCoin is a crypto company founded in 2014 by Ruja Ignatova and Karl Greenwood. This was just as cryptocurrency news was becoming big and people were starting to invest en masse. The main marketing move that OneCoin used was calling OneCoin - an alternative to Bitcoin. By the end of 2016, more than $4 billion had been invested into OneCoin. However, there was a hidden side to all of this. OneCoin was not a cryptocurrency whose price level was based on supply and demand but was manipulated privately.
Further to this, it operated as a Ponzi scheme. Investors were promised high returns, but instead, the new cash flow from investors was used to pay earlier investors. This led to a large chain being created which operated through to 2019.
Today, Karl Greenwood is in jail and faces up to 60 years there. Unfortunately, the Crypto Queen, Ruja Ignatova, has yet to be found. She was last seen boarding a flight from Bulgaria to Greece in 2018.
Conclusion:
The illegal side of cryptocurrency definitely exists, but it is less widespread than many believe it is. It rarely surfaces in everyday life and most large scams target inexperienced traders or work when people do not do their due diligence. If you do your due diligence and stay away from the dark web, then the illegal side of crypto is unlikely to affect you.
