Criminals are dropping bitcoin in favor of other digital currencies that are harder for law enforcement to use in tracking activities in an anonymous corner of the internet known as the dark web, analysts said.
Although hard numbers on criminal activity in digital currencies are difficult to pin down, Shone Anstey, co-founder and president of Blockchain Intelligence Group, estimates that illegal transactions in bitcoin have fallen from about half of total volume to about 20 percent last year.
“Now it’s significantly less than that,” he told CNBC earlier this month, noting that overall transaction volume has grown globally.
A U.S. Homeland Security official confirmed to CNBC in a phone interview on Thursday that criminals are “looking more closely at other currencies like monero and ethereum.”
“What the criminals are starting to see, and some of the trends we’re picking up as well, is that bitcoin also works equally just as much against you as it does for you,” said the official, who didn’t want to be named.
Ethereum cybercrime revenue in $ millions
Bitcoin is built on the blockchain, a public record of all transactions available online. Users also need a public address of numbers and letters in order to receive payments. As a result, intelligence agencies can track the movement of funds to addresses that hackers provide and catch the criminals when they try to cash out through more regulated entities such as exchanges or banks.
Jonathan Levin, co-founder of blockchain analytics firm Chainalysis, noted that recent law enforcement crackdowns have “made a dent in the trust” in dark web markets, where people primarily use cryptocurrencies for payment.
On July 20, the U.S. Justice Department and Europol announced the closure of two of the largest dark web marketplaces, AlphaBay and Hansa, which listed tens of thousands of vendors selling illegal drugs, counterfeit identification documents and other illicit products.
The DOJ said AlphaBay transactions used bitcoin, monero and ethereum, while Europol estimated a minimum of $1 billion in transactions on AlphaBay since its launch in 2014.
A few days later, a grand jury in the U.S. District Court for the Northern District of California charged Russian national Alexander Vinnik and the digital currency exchange he allegedly operated, BTC-e, with money laundering and related crimes. Once a major exchange, the BTC-e website now shows it’s been seized by U.S. authorities.
Screenshot of BTC-e landing page
“We’re getting a lot better through law enforcement tracking those [criminals] and holding the exchanges more accountable,” the Homeland Security official said. “I think [bitcoin]’s a lot more legitimate than people give it credit for.”
The average number of daily bitcoin transactions has climbed to 224,000 so far this month from around 206,000 last August, according to data from the Blockchain website. Daily trade volume in bitcoin has multiplied rapidly in the last year, climbing to an average of $2 billion so far this month from an average $86.7 million last August, according to CoinMarketCap data.
Bitcoin has more than quadrupled in value this year, to hit a record high of more than $4,700 on Tuesday.
Daily confirmed bitcoin transactions by seven-day average (2009 – 2017)
In the last three years, new digital currencies such as monero have emerged in an effort to increase privacy. Unlike the open transaction record of bitcoin, monero’s technology hides the name of the sender, amount and receiver.
A representative from monero did not respond to email and Twitter requests for comment.
Monero hit a record high Monday of $154.58, up more than 1,000 percent this year, according to CoinMarketCap.
Digital currency ethereum is an increasing target for cybercrime as well, according to Chainalysis. Ethereum is up about 4,300 percent this year amid a flood of funds into the digital currency for initial coin offerings, which have raised the equivalent of nearly $1.8 billion in the last three years, CoinDesk data showed.
Cybercriminals raised $225 million in ethereum so far this year, Chainalysis said in a report posted Aug. 7 on its website. Phishing attacks disguised emails or other communication used to trick people into disclosing personal information make up more than half of all ethereum cybercrime revenue this year at $115 million, the study said.
The Ethereum Foundation did not return a CNBC request for comment.
That said, analysts pointed out that bitcoin is still favored by many criminals since its relatively more widespread use makes it easier for them to quickly convert the digital currency to cash without any intermediary.
The sharp gains in bitcoin’s price have also made it more attractive for hackers in recent high-profile attacks such as WannaCry, though analysts estimate the criminals have only received tens of thousands to a few hundred thousand U.S. dollars’ worth of bitcoin.
“Bitcoin basically introduced a situation where we could bypass the money mules,” said Rickey Gevers, cybercrime specialist at RedSocks Security, which detects and fights against malware.
But, Gevers said, “in the beginning [bitcoin] looks very anonymous, and in the end it doesn’t look very anonymous.”
Wall Street is increasingly interested in bitcoin. More investment funds are opening and the U.S. Commodity Futures and Trading Commission is allowing bitcoin options to begin trading. Switzerland’s financial markets regulator in mid-July also approved Falcon Private Bank as the first Swiss private bank for bitcoin asset management.
“The whole use issue of digital currencies has become a big industry. Bitcoin isn’t this weird, odd currency that’s being used on the dark web,” said Paul Triolo, practice head of geotechnology at consulting firm Eurasia Group. “Since the early days of bitcoin on some [levels], the world has changed quite a bit.”
- Bitcoin Dips Below $7,000, Hitting Lowest In 2 Weeks - August 8th, 2018
- Things you need to know Bitcoin.com - July 29th, 2018
- Bitcoin - Bitcoin Price Live, BTC Value, Mining, BTC to USD ... - July 10th, 2018
- Digital Currencies and Financial Inclusion: Revisited | CGAP - May 19th, 2018
- Bitcoin vs. Electronic Money: Digital But Different | CGAP - May 19th, 2018
- Must I pay tax this year if I transfer bitcoin from ... - April 4th, 2018
- Will a 1099-B form work best for reporting bitcoin ... - April 4th, 2018
- Bitcoin (BTC) price: News & Live Chart - Trading Analysis ... - March 29th, 2018
- Bitcoin USD - BTCUSD Overview - MarketWatch - February 28th, 2018
- Buy Bitcoin IRA | Bitcoin IRA Investment & Retirement Account ... - February 28th, 2018
- Bitcoin Fees Have Become Infeasible - Bitcoin News - December 23rd, 2017
- Bitcoin's incredible surge takes it above $9,500 - Nov. 27 ... - November 27th, 2017
- Warning Signs About Another Giant Bitcoin Exchange - November 23rd, 2017
- What Is Bitcoin, and How Does It Work? - The New York Times - October 6th, 2017
- Why Beanie Babies make for a better investment than bitcoin - MarketWatch - September 5th, 2017
- Bitcoin's price hit $5000 last week. It's still a dumb investment - Los Angeles Times - September 5th, 2017
- Bitcoin dips another $300 after China's cryptocurrency crackdown - CNBC - September 5th, 2017
- IRS Eyes Profits From Bitcoin and Bitcoin Cash Investments - Investopedia - September 5th, 2017
- Sequoia, IDG to Invest in China Bitcoin Mining Giant - Bloomberg - September 4th, 2017
- Bitcoin Price Drops By Over $250 as Crypto Markets Lose Billions - CoinDesk - September 4th, 2017
- Bitcoin $5,000: Currency Hits New Record High | Fortune.com - Fortune - September 2nd, 2017
- Bitcoin Drops Below $5000 as Crypto Markets See $13 Billion Sell-Off - CoinDesk - September 2nd, 2017
- Searching for the future of currency, major companies try Bitcoin technology - PBS NewsHour - September 2nd, 2017
- Bitcoin Mempool is Empty and High Transaction Fees are no Longer Required - newsBTC - September 2nd, 2017
- Literally just one huge chart showing bitcoin's incredible rise to $4800 - MarketWatch - September 2nd, 2017
- Bitcoin's nearly five-fold climb in 2017 looks very similar to tech ... - CNBC - September 2nd, 2017
- BTC-e's Big Claim: Bitcoin Withdrawals to Begin Tomorrow - CoinDesk - CoinDesk - September 2nd, 2017
- As bitcoin surges in price and popularity, so do the complaints - CNBC - August 31st, 2017
- Here is how Indians are minting a fortune in bitcoins - Economic Times - August 31st, 2017
- Why Miners Are Mining Bitcoin Cash and Losing Money Doing It - CoinDesk - August 30th, 2017
- Bitcoin jumps nearly 70% for August to record high, offshoot 'bitcoin cash' falls to more than one-week low - CNBC - August 30th, 2017
- Bitcoin Foundation seeks legal protection from US currency regulation - The Independent - August 30th, 2017
- Bitcoin's epic rise leaves late-1990s tech bubble in the dust - Economic Times - August 30th, 2017
- 99Bitcoins | Buy Bitcoin, Bitcoin Guides & Reviews for ... - August 29th, 2017
- Bitcoin Meets Zcash: Developers Test Tool for Trustless Trades - CoinDesk - August 29th, 2017
- Russian Regulator: Bitcoin Should Be Limited to 'Qualified Investors' - CoinDesk - August 29th, 2017
- As bitcoin and rivals surge, so too have complaints to the CFPB - MarketWatch - August 29th, 2017
- Is Bitcoin the New Gold? - TheStreet.com - August 28th, 2017
- This Swedish guy bet all his life savings on bitcoin and it made him 100 times richer - Business Insider Nordic - August 28th, 2017
- How To Gain Bitcoin Exposure Inside Of Your Traditional Brokerage Account - Seeking Alpha - August 28th, 2017
- Value of all digital currencies hits record around $160 billion as ... - MarketWatch - August 28th, 2017
- Why Motherboard Is Capitalizing 'Bitcoin' Again - Motherboard - August 28th, 2017
- New Bitcoin.com Charts: The Bitcoin Ecosystem at a Glance - Bitcoin News (press release) - August 27th, 2017
- Expert Predicts Bitcoin Will be Worth up to $20000 in the Next Three Years - Futurism - August 27th, 2017
- Does Bitcoin Have a Mining Monopoly Problem? - Fortune - August 27th, 2017
- Bitcoin poised to challenge record after recovering from correction - MarketWatch - August 26th, 2017
- Bitcoin Prices Rise But Fall Short of All-Time High - CoinDesk - CoinDesk - August 26th, 2017
- Bitcoin and Artificial Intelligence Can Help Fight Sex Trafficking ... - Fortune - August 26th, 2017
- Bitcoin Investors, Beware: The IRS Is Coming for Your Vast Riches - TheStreet.com - August 26th, 2017
- Bitcoin's Lightning Network Moves Closer to Compatibility - CoinDesk - CoinDesk - August 26th, 2017
- A sketchy Satoshi has popped up to promote his new blockchain - The Verge - August 26th, 2017
- Bitcoin And Why You Think You're Right (Even When You're Wrong) - Seeking Alpha - August 26th, 2017
- Bitcoin and Ether rise, helping take crypto space above $150 billion market cap - MarketWatch - August 23rd, 2017
- Bitcoin Prices Are Up Over $100 Already Today - CoinDesk - August 23rd, 2017
- MGT Capital Raises $2.4 Million to Expand Bitcoin Mining Operation - CoinDesk - August 23rd, 2017
- Hackers Swipe Bitcoin by Stealing Your Cell Phone Number First - Inc.com - August 23rd, 2017
- Bitcoin rebounds after briefly entering correction territory - MarketWatch - August 22nd, 2017
- Here's Why Bitcoin Rose More than $1000 in Two Months - Futurism - August 22nd, 2017
- The IRS Has Special Software to Find Bitcoin Tax Cheats - Fortune - August 22nd, 2017
- Bitcoin Prices Dip Below $4000 to Hit 7-Day Low - CoinDesk - August 22nd, 2017
- China's two biggest bitcoin exchanges helped themselves to $150 million in idle client funds - Quartz - August 22nd, 2017
- Bitcoin Analysts Compete for the Highest Price Forecast - Bloomberg - August 21st, 2017
- A Bitcoin Law for Every State? Interest and Animosity Greet Model US Regulation - CoinDesk - August 21st, 2017
- Take Two: Bitcoin Miner BTCS Announces New Merger Deal - CoinDesk - August 21st, 2017
- Bitcoin About To Burst - Seeking Alpha - August 21st, 2017
- 10 Bitcoin Wallet Apps You Should Consider Using Today - HuffPost - August 20th, 2017
- Bitcoin-accepting shops leave cookie trail that crumbles anonymity - The Register - August 20th, 2017
- Bitcoin Trades Sideways as Bitcoin Cash Price Drops to $800 - CoinDesk - August 20th, 2017
- 'Bitcoin cash' surges 40% in single day as investors bet on its faster processing speeds - CNBC - August 19th, 2017
- 'Bitcoin cash' soars to record high above $900 as 'mining' profits jump - CNBC - August 19th, 2017
- Photos: Inside one of the world's largest bitcoin mines - Quartz - August 18th, 2017
- Bitcoin Surged to a New High Adding $17 Billion in Just Over a Week - Fortune - August 18th, 2017
- Another major country joins China and Japan in cracking down on bitcoin exchanges - CNBC - August 18th, 2017
- Bitcoin Cash Breaks Price Doldrums to Push Past $400 - CoinDesk - August 18th, 2017
- Poloniex and Breadwallet Will Support Bitcoin Cash Transfers - The Merkle - August 14th, 2017
- Bitcoin Price Flies To More Than $4100 Over Weekend - PYMNTS.com - August 14th, 2017
- Why is Bitcoin worth more than gold? - Independent Online - August 14th, 2017
- Bitcoin breaks $4000 - BetaNews - August 13th, 2017
- Bitcoin just passed $4000 - TechCrunch - August 13th, 2017
- Bitcoin vaults to new record above $4K, boosted by Japan and multiplying its value fourfold - CNBC - August 13th, 2017