Bitcoin’s latest ‘use case’ on the darknet raises old concerns

If arms, bio-weapons, pornography, and illicit drugs were not enough, market places on the darknet have started listing stolen Covid-19 vaccines and fraudulent vaccine certificates on their catalogs. Customers opting for these illegal vaccination methods are also falling prey to scams, found a recent investigative report by Coinform.

According to the same, vendors are selling Covid-19 vaccines found on the darknet market shop ‘COVID-19 vaccine.’ They are reportedly using BTC payment acceptance addresses that are associated with other addresses used by various darknet services – mixers, stolen/cloned credit card vendors, drug traders, and scams, specifically Bitcoin doublers. Coinform also identified these individuals as being the same group or entity also soliciting frauds.

This is not the first time the health sector has been leveraged by scamsters during the pandemic for monetization using cryptocurrencies. Late last year, dozens of hospitals in the U.S. were attacked by ransomware and their digital systems were locked up. The only path to recovery was paying up in the form of cryptocurrencies.

This is just one example from a list of illicit activities involving cryptocurrencies worldwide, examples further damaging the asset class’s adoption and consumer sentiment. Ergo, it is no surprise then that several important entities from the financial sector have spoken against its use and called for bans on the entire ecosystem.

Earlier this year, U.S Treasury Secretary Janet Yellen called cryptocurrencies “a particular concern” with respect to terrorist financing.

“I think many [cryptocurrencies] are used, at least in a transactions sense, mainly for illicit financing and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels.”

Moreover, European Central Bank President Christine Lagarde had this to say about Bitcoin,

“It is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”

However, the numbers paint a completely different story. According to a report by Chainanalysis, cryptocurrency-related crime fell significantly in 2020. Illicit activities made up just 0.34% of all cryptocurrency transaction volume last year, down from roughly 2% a year earlier.

However, the report did point out that while scams had fallen by 72%, ransomware attacks are the only activities on the rise. The darknet market itself saw a 42% decrease in usage over the past year.

Source: Chainanalysis

Crypto-crimes also make up a very small percentage of overall illicit activities carried out. According to the UN, between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activities.

Critics have also complained that exchanges that do not require KYC and other such regulatory terms harbor these activities. While that may be true, this report by RAND pointed out that,

“Despite the perceived attractiveness of cryptocurrencies for money laundering purposes . . . an estimated 99 percent of cryptocurrency transactions are performed through centralized exchanges, which can be subject to AML/CFT regulation similar to traditional banks or exchanges.”

The same report also underlined the increased use of Zcash to carry out transactions on the darknet. Marketed as privacy coins, Zcash, along with others like Monero and Dash, are the most sought-after currencies used by criminals due to the anonymity of the sender’s or receiver’s address or the transaction amount.