Bitcoin (BTC), the currency of criminals? The test against facts and figures – Bitcoin – News 2020

What haven’t we heard and re-heard: Bitcoin, the currency of “Darknet” or “DeepWeb” – depending on the lyricism of commentators – would be used to finance terrorism, launder money, exchange drugs in the least recommendable corners of the Internet! Thus, in the common psyche, the mother of all cryptocurrencies remains today associated with all evils.

A sulphurous reputation ..

Of course, when Uncle Bertrand learnedly explains how Bitcoin, beware, he is rarely able to really explain Why without tangled things getting tangled (anonymity “suspect“From its creator, exchange hacks, pyramid scams using Bitcoin as an ideal lure …). Difficult however to resent this good Bernard whose most courageous financial decision will have been to get rid of his actions last year Euro-tunnel : from BFM at TF1 we cannot say that the mass media which he is drinking from, reliable sources …

No wonder: Bitcoin and its blockchain introduce such a change in monetary paradigm (comparable to the emergence of the Internet or the printing press, from the point of view of the famous “disruption”), that universal phenomena are triggered: resistance to change, desire to prohibit and destroy, reactions of fear and rejection, of which you can find an idea of ​​the mechanics here.

The reality of the facts

It is in a particularly documented study that in its May 2019 edition, the very serious review Review of Financial Studies, looks at fintechs, blockchain and cryptocurrencies.

In this context, in the midst of consideration of the potentials and prospects of the sector, the 3rd world financial review questions: beyond fantasy and clichés, to what extent is bitcoin used as support for illegal activities such as the illicit trade in drugs, stolen property, weapons or pornography?

The publication recalls that answering this question reliably is essential for at least 3 reasons:

  • illegal activities prevent potential legitimate investors from investing in this market,
  • the suspicion of illegal activities has led certain governments to prohibit or limit the use of these currencies, which prevents organic market growth,
  • the lack of regulation in this market alone can support the growth of illegal activities such as “black electronic commerce” and the financing of terrorist organizations.

Study conditions and parameters

The researchers relied on algorithmic solutions allowing a reconciliation between the transaction flows on the blockchain and a panel of tools to materialize the illegal use of Bitcoin (judicial seizures, use on platforms and exchanges known to carry out illegal activities, presence of wallets on the DarkNet in particular).

The study covers approximately 300 million transactions in bitcoin used for commercial purposes, recorded in nearly 465,000 blocks between 2009 and 2017.


The teachings

In total, around 6 million users have been listed as being involved in illegal activitiess, or 5.9% of all users. However, their activity is particularly important and represents approximately 30% of Bitcoin transactions.

The researchers also attempted to assess the full extent of the illegal activity as part of a more in-depth review. They estimated that about a quarter of all users (28 million) were potentially involved in illegal activities, generating half of all market transactions. The total scale of the illegal activity is therefore estimated to be around $ 76 billion a year (which is comparable to the US drug market, estimated at $ 100 billion).

If these figures seem significant, the relative share of illegal activity in the total activity of Bitcoin has evolved substantially.

In 2009, much of the activity could be considered illegal, although absolute illegal activity was limited. 2010 saw a decrease in the relative share of illegal activities, but between 2011 and 2013 we can see a significant increase of this relative share, in part due to the boom in commercial potential on the darknet. Finally, in the last two years, the relative share of illegal users has decreased considerably, from 55% to about 25% of all users.

In summary

Finding a very clear drop in illegal activities using Bitcoin in the past two years, the researchers highlight two main factors:

  • the entry of traditional financial investors and “Crypto” funds, who have started to consider Bitcoin as a legitimate investment tool,
  • the development of other digital currencies where the level of anonymity is higher, so that more illegal activities have shifted to these currencies (such as Monero (XMR) or Dash (DASH)).

The authors of this study make a simple observation: if Bitcoin appears less and less used in the context of illegal activities (because of its anonymity which everyone now agrees is illusory), part of the problem is is simply moved to truly untraceable currencies, demonstrating that criminals will always have advance technology.

However, the figures tend to demonstrate this: current developments, whether it be the action of regulators or the overall awareness of the sector on the need to provide pledges of confidence in return for adoption massive, gradually but surely allow Bitcoin to get rid of its bad reputation.

Bitcoin (BTC), the currency of criminals? The test against facts and figures – Bitcoin – News 2020
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