The Crypto-Darknet Market Flourished in 2018, Netting Over $600M

Cryptocurrencies have always been accused of attracting the attention of the criminal world because of its ability to work across borders without relying on financial institutions. These institutions can somewhat deter the wrong crowd by requiring identification and documentation to confirm that identification, and thus “attaching” the money that’s being transferred to specific individuals or organizations that make the transactions.

Cryptocurrencies, however, allow anyone to create a virutal wallet address and start buying digital coins and making crypto transactions. The anonymity that cryptocurrencies enable has troubled the authorities and helped the money launderers.

Darknet activity regarding crypto has been remarkably resilient over the last few years. As cryptocurrencies matured and were brought into the spotlight by the vast public adoption and investment, authorities tried to curb the criminals from using them to launder money and fund their malicious activities. However, these efforts bore little fruit.

When one darknet market closes, others pop up to take its place. Nearly $700 million USD in cryptocurrencies went to identified darknet markets in 2017 alone. In 2018, the figure was lower but only slightly at $603 million USD. The temporary shutdown of the darknet market AlphaBay caused a drop of 60% in mid-2017; however, AlphaBay was quickly back and working again.

The large shares of darknet market activity held by AlphaBay have now been redirected to another market. Said market is now four times the size of AlphaBay at its peak which indicates that this problem is only worsening. On top of all this, darknet activity is unaffected by the bear market and price drops in cryptocurrency values. In 2018, darknet activity had an inverse relationship with the market performance overall.

Law enforcement has seen some success in curbing the malicious activity on the darknet markets; the aforementioned closing of AlphaBay was one such incident. However, the more law enforcement agencies target one specific platform, the darknet activity simply migrates to other platforms. Authorities and businesses that own these cryptocurrencies and tokens need to take the necessary steps to curb the criminal world from leeching off the crypto market. Only a united effort by both stakeholders can result in a successful drive.

For such a union, authorities need to realize and accept the fact that cryptocurrencies and blockchain, in general, are here to stay and introduce laws and regulations that help these companies in working with the government instead of outright banning them or limiting their ability to work. Organizations of cryptocurrencies need to introduce mechanisms that help authorities better monitor the financial activity taking place on their platforms. Through a united effort, the darknet activity can be tackled.