Bitcoin (BTC) Was Once the Dominant Currency in Illicit Transactions. Now It's Being Replaced

Bitcoin (BTC) was once considered the dominant currency in illicit transactions. However, it is now being replaced by privacy-focused cryptocurrencies

Bitcoin (BTC) is largely used by cryptocurrency traders and investors. It is also used by criminals for illicit activities. However, a new report by blockchain intelligence firm TRM Labs has found that Bitcoin is rapidly being replaced by other cryptocurrencies for illegal transactions.

According to TRM Labs, Bitcoin was used in 97% of the total cryptocurrency volume linked to criminal activity in 2016. But by 2022, this figure had dropped to just 19%.

The report predicts that by 2024, illegal cryptocurrency activities involving Bitcoin will further reduce to 12%, while Tron (TRX) will take the lead with 58% of the total volume.

Another report by Chainalysis also found that stablecoins now make up the majority of the total illicit transaction volume with 63%, and the use of Bitcoin in illegal activities has seen a huge reduction.

Earlier this year, one of the largest Dark Web marketplaces, White House Market, stopped accepting Bitcoin and will now only be used Monero (XMR) for transactions.

Announcing the change, the marketplace said: “The Bitcoin workaround was supposed to be there just to help with transition to XMR and as we are concerned, it’s done, therefore we are now Monero only, just as planned.”

Earlier in July, Elliptic researchers discovered $11 billion in illicit trades using Tether’s (USDT) stablecoin on Cambodia’s Huione Guarantee marketplace.

Also, Japanese law enforcement officials have successfully tracked Monero transactions, leading to the country’s first arrest in an case that involved cryptocurrency.

The shift away from Bitcoin in the Dark Web is being driven by the coin’s lack of privacy. Bitcoin’s blockchain is a public ledger, and when combined with additional data such as IP addresses or exchange records, every transaction can be tracked.

This complete transparency has enabled law enforcement agencies like the FBI to use blockchain analytics tools from firms like Chainalysis and Elliptic to dismantle major Dark Web markets.

Some notable examples include the shutdown of Silk Road in 2013, AlphaBay in 2017, Hydra in 2022, and Incognito Market in 2024.

Bitcoin also faces some technical challenges such as high transaction fees and slow confirmation times.

However, privacy coins like Monero, Zcash, and Dash use advanced technologies to provide high levels of anonymity, making transactions nearly impossible to track.

A recent study by ScienceDirect found that privacy coins are closely linked to Dark Web traffic, which contributes to their rising popularity in illicit markets.

The shift from Bitcoin to privacy coins and stablecoins also has another implication. It is becoming increasingly difficult for law enforcement agencies to track and prevent illegal transactions.

While advanced blockchain analytics tools can be used to detect transaction trails through mixers and tumblers, dealing with Monero and other privacy coins remains a huge challenge.

This has led to a greater focus from global regulators on privacy coins and stablecoins. Some institutions are moving to ban privacy coins entirely, while stablecoins are being placed under stricter oversight.

Overall, the transition from Bitcoin to privacy coins and stablecoins on the Dark Web is a clear trend. It is being driven by the increasing demand for anonymity and efficiency in illicit transactions.

Bitcoin is still used in certain crypto-related crimes, such as exchange scams and rugpulls. But for the bulk of illegal activities, such as drug sales and fraud, privacy coins are now the preferred choice due to their superior security and privacy.

This trend poses a significant challenge for law enforcement agencies, who are struggling to keep pace with the rapid rate of innovation in the cryptocurrency industry. It also raises questions about the role of cryptocurrencies in the future of finance and society.