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Europol has issued a new report on the illicit use of cryptocurrencies, and has used it to debunk some of the myths surrounding crypto and criminal behaviours.
The Hague-headquartered institution said that it recognises that, as with most technological innovations, cryptocurrencies are being exploited by criminals for money laundering purposes.
However, only a small part of the overall cryptocurrency economy is linked with criminal activities and this amount is smaller than the amount of illicit funds involved in traditional finance, according to Europol. The agency based its findings on the latest operational information contributed to Europol, data collected for the EU Serious Organised Crime Threat Assessment (SOCTA) 2021 and open sources.
In many ways, Europol’s report appears to be more set on rationalising cryptocurrency’s emerging role in the criminal world.
Its measured report contrasts with research by Chainalysis, which was also released this week. This found that criminals laundered $8.6bn of cryptocurrency in 2021, which was an increase of 30 percent from the previous year. However, this is below the $10.9bn laundered in 2019, according to the blockchain company.
According to Europol, with the adoption of Bitcoin, criminals were initially simply processing their transactions in Bitcoin through the transfer of funds from or to various wallets.
However, the development of blockchain analysis tools resulted in several successful investigations by law enforcement agencies.
For example, in April 2021, Europol assisted Italian authorities in tracking down a dark web hitman who was being paid in crypto.
The report dampens the perception that cryptocurrencies are the go-to choice for criminals making payments.
Although Europol’s data suggests that the use of cryptocurrency as part of criminal schemes is increasing, the value of cryptocurrency transactions related to criminal activities still only represents a small share overall, especially when compared with the even more anonymous cash, as well as other forms of transactions.
In addition, a range of constraints related to the use of cryptocurrencies have affected its popularity among criminals. For example, its high volatility is a factor deterring usage for long-term investments.
In spite of this, cryptocurrencies do continue to be attractive to criminals due to the pseudo-anonymous nature and the ease and speed with which funds can be sent anywhere in the world, the agency cautioned.
"The use of cryptocurrencies in money laundering schemes has been increasing, and many criminal networks relied on cryptocurrencies as a payment medium during the COVID-19 pandemic,” Europol said.
Last year, one of the most significant cases that Europol unravelled included ten hackers arrested for a string of SIM-swapping attacks against US celebrities, stealing more than $100 m in cryptocurrencies by hijacking phone numbers.
“The attacks orchestrated by this criminal gang targeted thousands of victims throughout 2020, including famous internet influencers, sport stars, musicians and their families,” the agency said in a statement at the time.
The report also repudiates the notion that crypto’s use is limited to cybercrime, and now relates to all types of crime that require the transmission of monetary value, including fraud and drug trafficking.
Nevertheless, although Europol acknowledges that the scale and share of the illicit use of cryptocurrencies by criminals is difficult to estimate, it is important to recognise that organised crime continues to rely on traditional fiat money and transactions to a large degree, in addition to emerging value transfer opportunities.
