Eduard Watson

10 months ago

When commentators speculate exactly why bitcoin and other cryptocurrencies have not taken off in quite the way that their originators planned, there are a number of reasons put forward.

 

Naturally, the first is that it’s a completely new kind of currency. It understandably takes time for the billions of people who use conventional currencies to make the switch to something different.

 

The second may be the volatility of their value. In the most extreme example of currency fluctuation in recent years, one bitcoin was worth around $1,000 at the start of 2017, but over $10,000 by the end of the year.

 

The third is the perception that cryptocurrencies all have links to crime and terrorism. Unfortunately, it’s true that on the dark web, cryptocurrencies are used to buy weapons, slaves and drugs – and this has undermined its reputation.

 

Why cryptocurrencies appeal to the underworld

 

 

For obvious reasons, the anonymity at the heart of cryptocurrencies inherently appeals to criminal and terrorist organisations. With no names or addresses attached to accounts, it’s the ideal way to pay or receive money that is all-but untraceable.

 

Then there is the irreversible nature of a blockchain transaction. This is a very valuable feature when two less-than-trustworthy parties may be doing an illegal deal with each other.

 

The speed of transactions is also of very obvious appeal, along with the fact that they are not being overseen by any bank, financial institution or other official authority who might notice something suspicious and then choose to investigate or intervene.

 

More than 99% of the internet is the Deep Web and dark web – a world in which illicit trading between anonymous parties is commonplace. In a truly global environment and one in which activity such as drugs smuggling and arms dealing is taking place across national borders, having one shared currency also has some very obvious advantages for international criminal and terrorist organisations.

 

The Silk Road situation

 

 

Cryptocurrency’s reputation problem also has a great deal to do with the fact that almost as soon as they entered the public consciousness they were identified by criminals as a way to trade anonymously online. One of the first organised methods was the now notorious Silk Road, which was originally founded with positive intentions.

 

Set up in 2011 and run on the dark web by Ross Ulbricht, it quickly became a major market place for illegal drug deals. Despite being closed down by the FBI in 2013 and Ulbricht being convicted in 2015 and imprisoned for life with no parole, Silk Road sprung up again later in the year, again being closed down by the FBI soon afterwards.

 

But the reputational damage to cryptocurrencies had been done, and many more criminals had been alerted to the possibilities that they present to them.

 

Terrorist organisations using cryptocurrencies

 

 

As well as being the favoured way to pay, deposits in cryptocurrencies are now also criminals’ preferred way of receiving payments in order to release ransomware. It is a increasingly popular method of extorting payments both from individuals who may inadvertently infect their computers and corporations who are effectively crippled when it happens to them.

 

So far we’ve only discussed criminals who have used cryptocurrencies to finance their nefarious activities, but equally worrying has been their prevalence in the world of terrorism.

There have been a number of high profile instances in recent times of both ISIS and Al-Qaeda receiving funds in the form of cryptocurrencies.

 

In 2017 a case came to light in New York of a woman using bogus information to raise over $60,000 in loans and credit card cash advances with the intention of transferring the money to ISIS in the form of bitcoin. She planned to route the transaction via Turkey, China and Pakistan making it even more untraceable. The authorities were able to intervene and she was prosecuted for intending to provide support for a terrorist organisation.

 

While most cryptocurrencies have been set up with integrity by their founders there are also examples of ICOs that have been fraudulent in intent. There are even questions being asked about whether the premature death of the founder of the QuadrigaCX exchange may have faked his own death in India in order to net $190 million. Of course, there may be nothing to these rumours. But, true or not, it all adds to the narrative of cryptocurrencies being run and used by unscrupulous characters. 

 

Cryptocurrencies in other industries

 

That said, cryptocurrencies are starting to be used by a number of legitimate industries to help them make transactions and grow as enterprises. For example, it’s predicted to become a force within the travel industry over the next decade – helping tourists make international payments without having expensive exchange rates.

 

Another prime example is the online gaming industry. On paper it seems like a perfect match. Online casinos operate internationally and many of the players who use them value their privacy. They also value the opportunity to make deposits and receive their winnings more quickly than through traditional banking methods. The chance to see exchange rates potentially act in their favour is also of obvious appeal.

 

Admittedly, there are a number of sites that are starting to welcome bitcoin and other cryptocurrencies as a form of payment – but these are largely unregulated. There’s also the rise of Edgeless casinos, which run on Ethereum.

 

However, for the larger online casinos to start accepting it a form of payment, there needs to be a shift in gambling regulations. Currently in the UK, casinos are shut down unless they can prove that they have robust procedures in place to identify and verify players and their funds, to reduce the risk of money laundering. This is clearly incompatible with the anonymous nature of cryptocurrency, and why you’re never likely to see cryptocurrency accepted as a payment option by a leading online operator like 777 casino.

 

Until cryptocurrencies can genuinely prove to be as well regulated as fiat currencies, with all the checks and verifications that this will entail, it’s not likely that the situation will change. It’s fair to say that the sheer volume of illicit activity carried out using cryptocurrencies means that it’s not something that going to happen soon.

 

The scale of the problem

 

In a report prepared by the University of Sydney Business School and published in 2018 it suggested that around 46% of all bitcoin transactions involve some kind of illegal activity. This amounts to the equivalent of $76 billion a year. Even more worryingly, the report includes the information that approximately 25% of all current bitcoin users are connected to illegal activity in some way.

 

With an issue of this scale, it calls for fairly draconian measures to tackle it. Already, many governments and financial institutions have started to put bitcoin and other cryptocurrencies under greater scrutiny. The problem that they face is that they have no direct control and, in many cases, it’s hard to identify who does. So unlike money laundering which banks are obliged to identify and report, no such measures can be taken for cryptocurrencies.

 

But as the use of cryptocurrencies does start to spread it seems likely that legislation and regulation may well be introduced. This might fly in the face of the principle of independence  on which all cryptocurrencies are based. But this is probably a trade-off worth making in order to ensure their long term survival. There will also inevitably have to be greater self-policing by the currencies themselves.

 

 

Finally, it’s worth remembering that all finance and financial transactions are targeted by criminals, whether they’re forging currency or hacking into bank accounts. So it’s not a problem that’s exclusive to cryptocurrencies – but it is one that’s going to need a great deal of ingenuity to solve.

People Mentioned

Anthony Antonopoulos

Popular figure and speaker for the crypto industry.

Justin Sun

Founder of TRON (TRX)

Coins Mentioned

VOLTZ

Voltz

CLR

Color Platform

CCC

Concierge Coin

BBGC

Big Bang Game Coin

RAGNA

Ragnarok

UT

Ulord

SHARD

Shard

IMPL

Impleum

PAC

PAC Global

DVP

Decentralized Vulnerability Platform

XTA

Italo

ELTCOIN

ELTCOIN

SMLY

SmileyCoin

NEC

Nectar

OVC

OVCODE

ADL

Adelphoi

DTC

Datacoin

PSC

PrimeStone

VLU

Valuto

VOTE

Agora

ZCL

ZClassic

BOA

BOSAGORA

TYPE

Typerium

EtLyteT

Ethlyte Crypto

EFX

Effect.AI

VULC

VULCANO

CYBR

CYBR Token

RPM

Repme

ONOT

ONOToken

PTON

PTON

BECN

Beacon

SFCP

SF Capital

DEV

DeviantCoin

XBP

BlitzPredict

HYT

HoryouToken

SNPC

SnapCoin

BDX

Beldex

CHT

Countinghouse

PENG

PENG

XMX

XMax

SDA

eSDChain

ANC

Anoncoin

XSR

Xensor

ETA

Etheera

OPNN

Opennity

KNT

Knekted

RPZX

Rapidz

NSD

Nasdacoin

ODEX

One DEX

IOP

Internet of People

BTK

Bitcoin Turbo Koin

PLA

PlayChip

PEDI

Pedity

FNB

FNB Protocol

ADC

AudioCoin

ZPT

Zeepin

QRL

Quantum Resistant Ledger

BBK

Bitblocks

GFUN

GoldFund

TRAID

Traid

BBS

BBSCoin

VTA

Virtacoin

ESCE

Escroco Emerald

TOC

TouchCon

CNX

Cryptonex

XLMX

Stellar Classic

DASHG

Dash Green

TTN

Titan Coin

JCT

Japan Content Token

ISR

Insureum

BITBTC

bitBTC

WEBN

WEBN token

HAVY

Havy

DFS

Fantasy Sports

CATT

Catex Token

JNB

Jinbi Token

PROC

ProCurrency

CRD

CryptalDash

HLX

Hilux

HBZ

HBZ coin

YEE

YEE

GRAT

Gratz

N8V

NativeCoin

EVC

Eva Cash

ELEC

Electrify.Asia

OBSR

Observer

NYEX

Nyerium

MOON

Mooncoin

ATB

ATBCoin

CLB

Cloudbric

PASC

Pascal

ASG

Asgard

SWC

Scanetchain

UBTC

United Bitcoin

AEG

Aegeus

ERO

Eroscoin

ACDC

Volt

HUM

Humanscape

HYPE

Hype Token

ZNN

Zenon

AEC

EmaratCoin

AAC

Acute Angle Cloud

SWTC

Jingtum Tech

BTCB

Bitcoin BEP2

IOG

Playgroundz

WAGE

Digiwage

CSTL

Castle

CNNS

CNNS

RTH

Rotharium

YEED

YGGDRASH

NODE

Whole Network

BTCONE

BitCoin One

SPT

Spectrum

HPC

Happycoin

BOLI

Bolivarcoin

VEO

Amoveo

DMD

Diamond

GEN

DAOstack

MASH

MASTERNET

TRN

Treelion

BIFI

Bitcoin File

LML

Lisk Machine Learning

FLDC

FoldingCoin

J

Joincoin

FOR

FORCE

PBT

Primalbase Token

SKT

SealBlock Token

VOCO

Provoco Token

PRJ

Project Coin

XMCC

Monoeci

QUAN

Quantis Network

KIN

Kin

HKN

Hacken

APL

Apollo Currency

SEER

SEER

WRC

Worldcore

XAP

Apollon

MPG

Max Property Group

POP

PopularCoin

VEST

VestChain

BC

Bitcoin Confidential

TMN

TranslateMe Network Token

MANNA

Manna

EBTC

eBitcoin

VENA

VENA

PUT

PutinCoin

SHB

SkyHub Coin

AKA

Akroma

MOC

Moss Coin

IHF

Invictus Hyperion Fund

INC

Influence Chain

ATP

Atlas Protocol

APR

APR Coin

AIB

Advanced Internet Blocks

KUBO

KuboCoin

ATX

Aston

PNK

Kleros

VME

VeriME

LDOGE

LiteDoge

GOT

ParkinGo

NTR

Netrum

BOUTS

BoutsPro

TRP

Tronipay

ETZ

Ether Zero

AMN

Amon

UGC

ugChain

TROLL

Trollcoin

BTAD

Bitcoin Adult

NEU

Neumark

ABX

Arbidex

XXX

AdultChain

CYFM

CyberFM

DGC

Digitalcoin

ESP

Espers

RBG

Rankingball Gold

ALT

Alt.Estate token

1WO

1World

BEZ

Bezop

MFTU

Mainstream For The Underground

XLR

Solaris

BZL

BZLCOIN

MAPR

Maya Preferred 223

URAC

Uranus

CMCT

Cyber Movie Chain

MRS

Marginless

TRC

Terracoin

UNI

UNICORN Token

FXT

FuzeX

MEC

Megacoin

DIN

Dinero

BUL

Bulleon

MFC

MFCoin

PXG

PlayGame

SKIN

SkinCoin

NOAH

Noah Coin

EOST

EOS TRUST

COB

Cobinhood

COAL

BitCoal

BUD

BUDDY

CHEESE

Cheesecoin

INNBCL

InnovativeBioresearchClassic

XET

ETERNAL TOKEN

FIII

Fiii

SPRKL

Sparkle

FYP

FlypMe

RVT

Rivetz

DOOH

Bidooh DOOH Token

INSTAR

Insights Network

BOLTT

Boltt Coin

KAASO

KAASO

XIN

Infinity Economics

DTEP

DECOIN

ALV

ALLUVA

STX

Stox

EVED

Evedo

PMNT

Paymon

NTY

Nexty

SIG

Spectiv

BSTN

BitStation

REBL

REBL

FLM

FolmCoin

XCLR

ClearCoin

CCRB

CryptoCarbon

PND

Pandacoin

CRE

Cybereits

NBOT

Naka Bodhi Token

PHI

PHI Token

JIYO

Jiyo [OLD]

MRK

MARK.SPACE

WYS

wys Token

ORS

Origin Sport

NBAI

Nebula AI

C8

Carboneum [C8] Token

QDAO

Q DAO Governance token v1.0

CCO

Ccore

GPYX

GoldenPyrex

SKY

Scopuly

DACS

DACSEE

BTRN

Biotron

ADM

ADAMANT Messenger

PAXEX

PAXEX

WAND

WandX

CCH

Coinchase Token

BIT

BitMoney

RUPX

Rupaya

FREE

FREE Coin

CNUS

CoinUs

PTT

Proton Token

XIND

INDINODE

CYMT

CyberMusic

ZP

Zen Protocol

XPC

eXPerience Chain

OLXA

OLXA

CEDEX

CEDEX Coin

BUZZ

BUZZCoin

MRO

Mero Currency

BLINK

Blockmason Link

ARY

Block Array

STA

Starta

HWC

HollyWoodCoin

XSD

SounDAC

PAT

Patron

XPTX

PlatinumBAR

PDATA

PDATA

SCC

STEM CELL COIN

ARCT

ArbitrageCT

COTN

CottonCoin

OCUL

Oculor

INF

Infinitus Token

NOBS

No BS Crypto

NPXSXEM

Pundi X NEM

RC20

RoboCalls

IPSX

IP Exchange

QBX

qiibee

SHMN

StrongHands Masternode

DCTO

Decentralized Crypto Token

ENTRC

EnterCoin

UCASH

UNIVERSAL CASH

ALB

ALBOS

DAGT

Digital Asset Guarantee Token

WEB

Webcoin

BBN

Banyan Network

PNX

Phantomx

ETG

Ethereum Gold

MXT

MarteXcoin

BTX

Bitcoin X

OCL

Oceanlab

GOD

Bitcoin God

CDC

Commerce Data Connection

AZART

Azart

TRXC

TRONCLASSIC

REF

RefToken

HUR

Hurify

MATIC

Matic Network

DGTX

Digitex Futures

BCV

BitCapitalVendor

TNT

Tierion

ETN

Electroneum

SOLVE

SOLVE

EURS

STASIS EURO

XZC

Zcoin

NPXS

Pundi X

NEX

Nash Exchange

SEELE

Seele

GNT

Golem

ELF

aelf

SNT

Status

RIF

RIF Token

ZIL

Zilliqa

REN

Ren

AOA

Aurora

STEEM

Steem

NEW

Newton

ENJ

Enjin Coin

CRPT

Crypterium

FTT

FTX Token

IOST

IOST

ARDR

Ardor

NRG

Energi

XVG

Verge

NEXO

Nexo

MAID

MaidSafeCoin

BTM

Bytom

MCO

MCO

AE

Aeternity

HC

HyperCash

KMD

Komodo

QNT

Quant

BCN

Bytecoin

BTS

BitShares

MONA

MonaCoin

ICX

ICON

WAVES

Waves

SC

Siacoin

BCD

Bitcoin Diamond

THETA

THETA

BTT

BitTorrent

REP

Augur

LSK

Lisk

DGB

DigiByte

ALGO

Algorand

DAI

Dai

VSYS

V Systems

KCS

KuCoin Shares

NANO

Nano

SNX

Synthetix Network Token

OMG

OmiseGO

EKT

EDUCare

ABBC

ABBC Coin

CENNZ

Centrality

SXP

Swipe

BTG

Bitcoin Gold

RVN

Ravencoin

ZB

ZB

DCR

Decred

LUNA

LUNA

HOT

Holo

QTUM

Qtum

VET

VeChain

ZRX

0x

TUSD

TrueUSD

HEDG

HedgeTrade

ZEC

Zcash

PAX

Paxos Standard

ONT

Ontology

DOGE

Dogecoin

BAT

Basic Attention Token

XEM

NEM

CRO

Crypto.com Coin

MKR

Maker

USDC

USD Coin

NEO

NEO

ETC

Ethereum Classic

XTZ

Tezos

ATOM

Cosmos

DASH

Dash

MIOTA

IOTA

HT

Huobi Token

XMR

Monero

LINK

Chainlink

ADA

Cardano

LEO

UNUS SED LEO

TRX

TRON

XLM

Stellar

BSV

Bitcoin SV

EOS

EOS

BNB

Binance Coin

LTC

Litecoin

BCH

Bitcoin Cash

USDT

Tether

XRP

XRP

ETH

Ethereum

Companies Mentioned

Tron Foundation

Tron Foundation

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Eduard Watson Author

An experienced finance writer for more than 10 years, active industry watcher, and gadget enthusiast.

1518 Articles
7255 Followers