Bitcoin is the crypto of choice for criminal transactions — not Monero
The convenience, availability and liquidity of Bitcoin often trump the enhanced privacy measures offered by other currencies
A common critique of the cryptocurrency industry as a whole is that in the wrong hands, it has the potential to facilitate large scale criminal activity. CipherTrace, a blockchain analytics firm, recently completed a five-month study on sextortion campaigns that use Bitcoin to gain insight into why Bitcoin appears to be the most widely used in criminal networks.
While Bitcoin is not the perfect cryptocurrency by far, it appears to achieve the best balance of features that create a conducive environment for malicious activity.
In the case of sextortion scams, victims are forced to shell out a substantial sum of Bitcoin to prevent their ‘sensitive’ media — of the sexual variety — from being leaked to the public. Bitcoin addresses can be deciphered for each transaction and subsequently traced, so it may not initially look like it is the cryptocurrency of choice. In this respect, privacy coins such as Zcash and Monero appear to be safer options for criminals trying to avoid detection.
However, Bitcoin’s blockchain technology also benefits from sustainable financial infrastructure and its image beyond just the cryptocurrency world. To facilitate their transactions, sextortion scammers have been found to “rely on the easiest and most well-known currency.”
This insight came from the CEO of CipherTrace, Dave Jevans.
Since these scams are not targeted and widespread, criminals need to respond to the growing need for a universal currency over a private currency. However, this does not mean that the private currency cannot be a part of the transaction to throw off attempts at tracing.
“There are hundreds of exchanges where you can purchase Bitcoin and thousands of Bitcoin ATMs around the world. Criminals can always take the bitcoin payments, then swap them to a privacy coin, move them around a bit, then back into Bitcoin for cash-out.” Jevans explained.
The financial infrastructure of Bitcoin makes liquidity in the market much simpler as well. The Head of Research at Chainalysis, Kim Grauer, pointed out that Bitcoin is by far the “most liquid currency.”
Such scams call for perpetrators to strike a balance between the privacy of payment and convenience. Monero and Bitcoin occupy opposite ends of the spectrum on this; but while there is a choice between the two, Grauer explains that Monero’s “enhanced privacy” loses to Bitcoin’s better balance of features.
“Bad actors often have to choose between using a cryptocurrency like Monero for its enhanced privacy and Bitcoin for its convenience, availability, and liquidity. Bitcoin usually wins, especially as exchanges increasingly delist privacy coins in light of regulations.” Grauer said.