A recent report by digital asset compliance and risk management firm TRM Labs suggests that Bitcoin is no longer the cryptocurrency of choice for cybercriminals. The study reveals that illicit finance volumes involving Bitcoin have significantly declined over the past seven years, indicating a shift towards other cryptocurrencies or traditional fiat channels for moving illicit funds.
TRM Labs highlights that a new era of multichain technology has led to a “qualitative leap” away from Bitcoin as the primary means of conducting criminal transactions. The report emphasizes that cash and other forms of fiat-related finance continue to be the default methods for illicit money movements, with even older systems like hawala (money transfer without physical movement) playing a role in financing illegal activities and laundering proceeds.
The study further reveals that although illicit activity involving cryptocurrencies has increased, these criminal practices were not invented by the crypto industry. In 2022 alone, approximately $2 billion in crypto was stolen through attacks on cross-chain bridges, but Bitcoin accounted for only a small fraction of that amount.
According to TRM Labs, Bitcoin’s share of illicit transactions has plummeted from 97% in 2016 to just 19% in 2022, reflecting the impact of the multi-chain era on the distribution of illicit crypto volume. Ethereum has emerged as the predominant cryptocurrency for illicit activities, accounting for 68% of the crypto hack volume in 2022, followed by BNB Smart Chain at 19%.
The report also indicates a shift in terrorist financing methods, with Bitcoin being “all but replaced” by Tron as the “exclusive currency” for such activities. TRM Labs claims that Tron accounted for 92% of terrorist financing transactions in 2022. Additionally, the use of Tether, a stablecoin, among tracked terror financing entities saw a 240% increase in 2022.
These findings may have implications for Bitcoin’s public image. On one hand, the declining involvement of Bitcoin in illicit transactions could be seen as a positive development, potentially improving its reputation as a legitimate financial asset. However, the report also reveals that Bitcoin was still used in substantial amounts for illegal activities, including Ponzi schemes, darknet market transactions related to narcotics, and DeFi hacks and exploits, amounting to billions of dollars in losses.
