Crypto-crime: A look at how Bitcoin, ultimately, always a coin for most criminal elements.

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2020 has become a milestone year for the blockchain sector. For the world’s biggest cryptocurrency, Bitcoin, the year saw dramatic price falls as well as a record new ATH set during the December 2020 bull market. The wider crypto-space not only saw expanded usage and increased usage of instances, but 2020 was also the year in which other crypto-spaces like DeFi started to recognise their own value.

Although 2019 saw a lot of losses being suffered on the market as a result of rampant fraud in crypto-space, 2020 was, in many respects, a welcome improvement both for regulators and consumers.

There have been several developments in the field of cryptocurrency, and only a few have been optimistic. In the case of Bitcoin, 2020 was a year in which big financial companies took notice of Bitcoin‘s existence and prospects. Examples of Grayscale‘s large acquisition of BTC and MicroStrategy‘s ongoing investment have also been cited.

Bitcoin’s recognition has, in many respects, taken him further from the doubt that he used to court a few years ago. What has not improved, though, is the fact that, anytime there appears to be a case of crypto-crime, Bitcoin is invariably always a coin for most of the bad actors.

At the beginning of the year, Nathaniel Popper, a New York Times writer, quoted the Chainalysis article and noted that:

“Illegal activity appeared to be one of the few parts of the Bitcoin economy impervious to changes in price, according to Chainalysis’s new Crypto Crime Report.”

Eleven months after this assertion was first made, it can be argued that Bitcoin is still the undisputed choice of the criminal elements. This is valid even though the offence is not exclusively crypto-related. Despite the lack of anonymity, even in situations where ransom is required, Bitcoin seems to be the prefered currency of choice. And this guilt by default may be one of the reasons that certain regulators and policymakers sit on the fence when it comes to ensuring greater legal transparency for crypto-related transactions.

Although Blockchain will still have to contend with its reputation wars, the crypto-market, in general, and Bitcoin have suffered less from crypto-crimes in 2020 compared to previous years. According to data generated by CipherTrace, cumulative damages from crypto-thefts, attacks, and fraud decreased from $4.4 billion in 2019 to $1.8 billion in the first 10 months of 2020. According to CipherTrace CEO Dave Jevans, one of the reasons behind this dip can be credited to:

“What we have seen is that exchanges and other cryptocurrency players have implemented more security procedures. […] They have taken the guidance and implemented the procedures to secure their funds better. So you’re going to see less mass-scale hacks.”

In reality, Blockchain analytics firm Elliptic recently offered some insightful insights on how 2020 plays out when it comes to crime in its study entitled “Financial Crime Typologies in Cryptoassets.” The study noted more than 35 financial crime typologies concerning the use of crypto-assets such as Bitcoin, emphasising the recent pattern of importance, i.e. the rising use of anonymity wallets in the crypto-laundering method.

The article outlined the following:

“At least 13% of all proceeds of crime in Bitcoin were sent through privacy wallets in 2020, up from just 2% the year before. In 2020 this represented over $160 million in bitcoin from darknet markets, thefts and scams being laundered through privacy wallets.”

Source: Elliptic

The study in question went on to suggest that whilst the total crime rate in crypto may have declined in 2020 relative to 2019, advances such as these may have become a problem in the coming years.

What should we expect in 2021?

Yeah, it’s a difficult question to tackle, but there have been reports that suggest that there could be contributing factors that could make the incidence of crypto-crime more rampant in 2021. Kaspersky Labs recently published a study that tried to forecast what 2021 will look like, particularly with regard to cryptocurrency-related crimes, and interestingly, the COVID-19 pandemic is likely to play a role, much like it has exerted its impact in all other walks of existence.

The article outlined the following:

“The COVID-19 pandemic is likely to cause a massive wave of poverty, and that invariably translates into more people resorting to crime including cybercrime. We might see certain economies crashing and local currencies plummeting, which would make Bitcoin theft a lot more attractive”

Whether or not those risks materialise as a consequence of pandemic-induced poverty, the stakes for Bitcoin have risen considerably. In the one hand, the dam of the bad press arising from its connection with the underbelly of cyberspace has not really impacted the increased rate of institutional and retail buyers, but one cannot be too sure how many regulators around various countries will see this.

In an environment that has a lot to do with crypto-adoption, such compliance issues should be avoided. However, as far as 2020 is concerned, there is more to be wished for, relative to 2019, in terms of overall space stability, and one can expect that the trend will continue in 2021.


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