Bitcoin is less involved in crime than you think



  • The number of bitcoins involved in illegal activities is declining

  • Cryptocurrency tracking technologies are improving

  • Cryptocurrencies must get rid of the stigma and become part of the mainstream

International consortium of news organizations developing transparency standards.

In the minds of some people, bitcoin and other cryptocurrencies still go hand in hand with criminal activity. However, recent studies suggest otherwise..

Perhaps, at one time, the news about the illegal marketplace Silk Road really became one of the most powerful growth drivers for Bitcoin (BTC). The world learned about the existence of an online platform where it was possible to conduct illegal transactions, buy weapons, drugs – and pay for it with virtual money that cannot be tracked. This attracted many new users to Bitcoin, including people with bad intentions..

Soon enough, the authorities closed down Silk Road, but the sediment remained. In the minds of the general public, bitcoin has firmly established itself in the same associative row with criminal activity. Perhaps, until 2016, the whole set of people’s knowledge about bitcoin boiled down to the fact that its rate is jumping all the time and that criminals use it.

Is Bitcoin really that popular in the criminal environment? Has his perception in the public eye changed??

Obsolete numbers

In May 2019, an extensive study was published on the Oxford University Press website, according to which 26% of all Bitcoin users and up to 46% of all Bitcoin transactions can be attributed to illegal activity. In 2017, the similar volume of illegal bitcoins to $ 7 billion with a total trade turnover of $ 76 billion. 

However, it should be borne in mind that there have been many changes since 2017, when the researchers collected the data. Thus, the mainstream interest in bitcoin has grown significantly, and along with it, attempts have begun to tighten industry regulation, including the requirement to comply with the KYC (Know Your Customer) procedure. Protocols for tracking the movement of funds have also been improved..

Some companies even offer related services. Thus, the AMLBot company, in order to combat money laundering (AML), provides clients with a service for the financial monitoring of cryptocurrencies. Using the developed algorithms, experts track addresses and transactions involved in criminal activity.

Such tools demonstrate that the trend towards regulation of the crypto space should reduce the number of “black” addresses.

As AMLBot experts told BeInCrypto: 

“We believe that [the number of black addresses] will fluctuate around 2% due to increased industry regulation and tightened AML / KYC procedures on the largest exchanges.”.

Tainted bitcoins

The AMLBot methodology allows for the flagging of coins related to criminal activity, from activity on underground marketplaces to ransomware attacks and stolen coins. Such coins are beginning to be considered high risk..

According to the AMLBot criteria, activity associated with cryptocurrency ATMs and exchanges that do not follow the KYC procedure can be considered suspicious activity. Meanwhile, trustworthy coins are coins that are mined in the process of mining or stored in well-regulated / self-regulated crypto wallets..

Read also: How to Safely Buy Bitcoin (BTC) in 2021 – 5 Risk-Free Ways

Money laundering isn’t easy, but criminals don’t give up. As commented in AMLBot for the BeInCrypto editorial board:

“Loopholes for money laundering still exist. These include peer-to-peer (P2P) exchanges, decentralized exchanges (DEX), exchanges that do not adhere to strict AML / KYC procedures, etc. The easiest way to sell is with a discount “.

The 2019 study above uses a similar algorithm to identify dirty bitcoins known as the Union-Find algorithm. This method of tracking the movement of funds automatically compares transactions and addresses with the origin and final destination of the “highlighted” coins.

However, this method is not 100% accurate. In addition, the number of addresses has now increased significantly compared to 2017. This means that the “46%” of criminal addresses given in the study are no longer true..

Moreover, at the moment, the capitalization of the bitcoin market is already about $ 700 billion. Taking into account this fact, even if now there are illegal bitcoins in the amount of $ 7 billion in circulation, as stated in the study, this amount is disproportionately small in the total market size and is only about 1%.

In addition, according to the latest research, the number of crimes involving bitcoin is consistently decreasing. So, according to CipherTrace, in 2020, as of October, the volume of cryptocrimes decreased to $ 1.8 billion against $ 4.5 billion a year earlier..

Next, we should dwell in more detail on what is considered “dirty bitcoin”.

What bitcoin is considered dirty?

Special “mixers” are one of the ways to launder bitcoins. By passing coins through such services, criminals cover their tracks among a huge number of transactions and wallets.

As a result, “dirty” bitcoins are mixed with “clean” ones so much that it becomes very difficult or even impossible to track them. Accordingly, many innocent and law-abiding users turn out to be the owners of bitcoins, previously marked as “dirty”.

Another problem is the question of suspicious wallets. According to the AMLbot qualification, for example, wallets that are associated with sites that do not comply with KYC standards or are very negligent about them fall under the hood.

Bitcoin is less involved in crime than you think

Likewise, a variety of over-the-counter (OTC) or peer-to-peer (P2P) services can hit the integrity of the address. An example is the Local Bitcoins platform, which has recently experienced pressure from regulators..

Best Bitcoin Wallets and Why You Should Use Them.

However, it cannot be said indiscriminately that all wallet owners who use OTC / P2P services are involved in illegal activities. The services of the same Local Bitcoins are also used by quite respectable citizens.

Thus, “clean” coins can also fall into the “dirty” category. At the same time, criminals manage to successfully launder some of the “dirty” bitcoins. Therefore, algorithms for tracking criminal activity are not always accurate, and the actual amount of “dirty” bitcoins in circulation may not coincide with the figures presented on paper..

Whales are clean as glass

The belief that Bitcoin is involved in almost all illegal activities on the Internet is nothing more than a common misconception..

AMLBot experts analyzed the top 100 bitcoin addresses and came to the conclusion that the vast majority of their owners are absolutely clean.

Source: Glassnode

According to the analytical portal Glassnode, there are currently over 100 wallets that hold over 10,000 BTC. These include the address where since 2014 there have been untouched bitcoins worth about $ 1.9 billion..

The lion’s share of all BTC in circulation is concentrated on these 100 wallets – and at the same time, the vast majority of them have nothing to do with criminal activity. More than 1% of coins were identified only at three addresses, the receipt of which could be associated with illegal activity.

Private cryptocurrencies are more reluctant to be regulated, but AMLBot believes that over time, most governments and reputable exchanges will cut off their oxygen. Such coins will be outlawed, although, no doubt, they will retain their popularity “in certain circles”.

Bright tomorrow?

Thus, while past research has shown a strong link between bitcoin and criminal activity, more recent evidence suggests that the proportion of such “dirty” bitcoins is declining..

Cryptocurrency market capitalization has exceeded $ 1 trillion, and governments are more purposefully seeking to regulate it.

It should be noted that Joe Biden plans to appoint Gary Gensler as the new head of the US Securities and Exchange Commission (SEC). Gensler is known in the crypto industry as a skeptic about XRP and ETH. However, the current SEC war with Ripple will not affect most other leading cryptocurrencies in any way..

Improving technology, coupled with increased government understanding of the industry, should ultimately help build a secure and decentralized digital asset system..


All information contained on our website is published in good faith and objectivity, and for informational purposes only. The reader is solely responsible for any actions he takes based on the information received on our website..

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Bitcoin is less involved in crime than you think
Bitcoin is less involved in crime than you think
Bitcoin is less involved in crime than you think

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