2020 has been a monumental year for the cryptocurrency market. For the world’s largest cryptocurrency, Bitcoin, the year saw drastic dips in price as well as a new ATH set during the December 2020 bull run. The larger crypto-space has not only seen increased adoption and greater use cases, but 2020 was also the year during which other spaces in crypto like DeFi began to realize their own potential.
While 2019 saw a lot of losses being inflicted on the market as a result of rampant crime in the crypto-space, 2020, in many ways, has been a welcome change, for both regulators and users.
Some things have changed and some have not
There have been many changes in the world of cryptocurrencies and quite a few of them have been positive. In the case of Bitcoin, 2020 has been characteristic of a year in which large financial institutions have taken note of Bitcoin’s presence and potential. The examples regarding Grayscale’s massive BTC buying spree and MicroStrategy’s continued investment have often been quoted.
The recognition Bitcoin has received, in many ways, positions it away from the suspicion it used to court a few years ago. However, what has not changed is the fact that when there seems to be a case of crypto-crime, Bitcoin, inevitably, is still the go-to coin for most bad actors.
At the start of the year, the New York Times journalist Nathaniel Popper had cited a report by Chainalysis and noted that,
“Illegal activity appeared to be one of the few parts of the Bitcoin economy impervious to changes in price, according to Chainalysis’s new Crypto Crime Report.”
Eleven months since this statement was first made, one can argue that Bitcoin is still the uncontested favorite among bad actors. This is true even when the crime is not strictly crypto-related. Despite the lack of anonymity, even in cases where a ransom is demanded, Bitcoin seems to be the favorite currency of choice. And this guilt by association could be one of the reasons why many regulators and legislators continue to be on the fence when it comes to providing greater regulatory clarity for crypto-related transactions.
While Bitcoin may have to continue to deal with its perception battles, the crypto-market, in general, and Bitcoin, in comparison to previous years, suffered less in 2020 from crypto-crimes. According to data provided by CipherTrace, total losses from crypto-thefts, hacks, and frauds dropped from $4.4 billion in 2019 to $1.8 billion over the first 10 months of 2020. One of the reasons behind this dip, according to CipherTrace CEO Dave Jevans, can be credited to,
“What we have seen is that exchanges and other cryptocurrency players have implemented more security procedures. […] They have taken the guidance and implemented the procedures to secure their funds better. So you’re going to see less mass-scale hacks.”
In fact, blockchain analytics company Elliptic recently in its report titled “Financial Crime Typologies in Cryptoassets” provided some interesting insights on how 2020 played out when it comes to crime. The report noted more than 35 financial crime typologies that involve the use of crypto-assets such as Bitcoin, highlighting a recent trend of significance, i.e., the growing use of privacy wallets in the crypto-laundering process.
The report highlighted,
“At least 13% of all proceeds of crime in Bitcoin were sent through privacy wallets in 2020, up from just 2% the year before. In 2020 this represented over $160 million in bitcoin from darknet markets, thefts and scams being laundered through privacy wallets.”
The report in question went on to say that while the overall crime rate in crypto may have decreased in 2020, in comparison to 2019, there have been developments like these that may be a concern in the coming years.
So, what does 2021 look like?
Well, that’s a tricky question to answer, however, there have been studies that show that there could be contributing factors that could make crypto-crime rates more rampant in 2021. Kaspersky Labs recently released a report that tried to predict what 2021 will look like especially with regard to cryptocurrency-related crimes and interestingly, the COVID-19 pandemic is likely to play a part, just as it has exerted its influence in all other walks of life.
The report highlighted,
“The COVID-19 pandemic is likely to cause a massive wave of poverty, and that invariably translates into more people resorting to crime including cybercrime. We might see certain economies crashing and local currencies plummeting, which would make Bitcoin theft a lot more attractive”
Regardless of whether such threats materialize as a result of pandemic-induced poverty or not, the stake has gotten substantially higher for Bitcoin. On the one hand, the barrage of bad press resulting from its association with the underbelly of cyberspace hasn’t really affected the increased rate of institutional and retail investors, but one can’t be too sure about how many regulators across different countries will perceive this.
In a world that has much to benefit from crypto-adoption, such regulatory problems should be avoided. However, there is much to be hopeful for as 2020 fared comparatively better than 2019, in terms of the overall safety of the space, and one can hope that the trend will continue in 2021.