For years, Bitcoin has been synonymous with illicit activities in the public imagination. However, a recent report by TRM Labs, a blockchain intelligence firm collaborating with law enforcement agencies, challenges this perception by revealing a significant decline in Bitcoin’s role in facilitating illicit crypto activities. The findings shed light on a shifting landscape where alternative blockchains and tactics are increasingly preferred by criminals.
Source: TRM Labs
Contrary to the popular belief that Bitcoin remains the go-to choice for illegal transactions, the TRM Labs report shows a noteworthy decrease in its dominance. In 2016, Bitcoin accounted for a staggering 97% of the total illicit crypto volume, but by 2022, this figure had plummeted to a mere 19%. This decline signifies a significant shift in criminal behavior, as alternative cryptocurrencies gain prominence in facilitating illicit activities.
The decline in Bitcoin’s dominance in illicit activity can be attributed to the emergence of a multi-chain reality in the cryptocurrency space. With the rise of various blockchain networks and cross-chain bridges, criminals have exploited vulnerabilities in these systems. Attacks on cross-chain bridges resulted in approximately USD 2 billion being stolen in 2022.
Criminals also engage in chain-hopping, using multiple blockchain networks to obscure the source and destination of illicit funds during money laundering activities.
While Bitcoin’s share has decreased, other cryptocurrencies have taken the lead in illicit activity. Ethereum and Binance Smart Chain were mentioned as dominating the field, with shares of 68% and 19%, respectively, for crypto hack volume in 2022.
TRM Labs identifies a diversification towards other blockchains, such as Ethereum, Tron, and Binance Smart Chain, as a key contributing factor. Criminals are exploiting the unique features of these blockchains, using them as platforms for money laundering and to obscure the flow of illicit funds. The emergence of tactics like “chain-hopping,” which involves moving crypto assets between different blockchains, further complicates efforts to track and detect criminal transactions.
Esteban Castaño, co-founder and CEO of TRM Labs, highlights the importance of their mission to map illicit financial flows on-chain. He asserts that the shift away from Bitcoin towards other blockchains and tactics underscores the necessity of comprehensive measures to combat illicit activities in the crypto space.
While the TRM Labs report showcases the diminishing role of Bitcoin in illicit crypto activities, it is important to note that cryptocurrencies, including Bitcoin, can still be used for both legal and illegal purposes. However, attributing the majority of illicit activities to Bitcoin alone oversimplifies the complex dynamics at play. Criminals are adapting to the evolving crypto landscape and exploring different avenues to evade detection and launder illicit funds.
Efforts to combat crypto-related crimes should focus on a multi-pronged approach. This includes promoting education and awareness about responsible crypto usage, fostering cooperation between regulatory bodies and law enforcement agencies, and implementing robust monitoring and detection mechanisms across various blockchains.
