The Shift Back to Bitcoin
Darknet markets are witnessing a notable shift as they increasingly turn back to Bitcoin (BTC) as their primary cryptocurrency. This trend is largely driven by the rising liquidity issues and accessibility challenges faced by privacy-centric coins like Monero (XMR). According to Eric Jardine, the Cybercrime Research Lead at Chainalysis, the recent delisting of Monero from major exchanges has significantly influenced this transition.
Impact of Monero’s Delisting
In a recent interview with CoinDesk, Jardine highlighted the correlation between Monero’s exchange delistings and the surge in Bitcoin inflows. He stated, “After major exchanges delisted XMR, we observed a significant increase in bitcoin inflows. Reduced accessibility is steering users back toward bitcoin.”
Prior to these delistings, many Western darknet markets had either fully transitioned to Monero or were using it alongside Bitcoin. However, following the removal of XMR from major exchanges, its usage has seen a steep decline.
Delistings from Major Exchanges
The delisting of Monero from exchanges such as OKX and Binance has played a crucial role in this crypto market shift. At the end of 2023, OKX removed Monero along with other privacy-focused cryptocurrencies like Dash (DASH) and ZCash (ZCH). Binance announced its intention to delist Monero in February 2024, stating, “When a coin or token no longer meets this standard, or the industry changes, we conduct a more in-depth review and potentially delist it.”
Decline in Monero Transactions
On-chain data from BitInfoCharts reveals that the daily number of Monero transactions has halved compared to the previous year. Jardine emphasized the importance of liquidity and accessibility for a cryptocurrency to function effectively as a medium of exchange.
Illicit Activities and Crypto Transactions
Despite the focus on illicit activities associated with cryptocurrencies, Jardine pointed out that such transactions constitute only a small fraction of overall crypto activity. “Typically, illicit transactions account for at or below 1% of total crypto activities. While addressing these issues is essential, broadly labeling crypto negatively is inaccurate and counterproductive,” he stated.
According to Chainalysis, only about 0.14% of all crypto transactions, which amounts to roughly $50 billion, are related to illicit activities. Interestingly, there has been a rise in the use of stablecoins as a method for illicit payments.
Efforts to Combat Illicit Activity
In response to the rise in illicit transactions, stablecoin issuers are taking action. The Tron-led T3 Financial Crime Unit, consisting of Tron, Tether (USDT), and TRM Labs, has successfully frozen over $100 million in illicit funds.
Law Enforcement Focus on Darknet Markets
Jardine also pointed out that law enforcement agencies are particularly focused on darknet markets due to their involvement in the fentanyl trade. The presence of these substances significantly increases the likelihood of attracting law enforcement attention, as combating the drug crisis is a priority for agencies worldwide.
“Markets have varying levels of sensitivity to fentanyl-related sales,” Jardine explained. “Some claim they don’t engage in it but fail to police their vendors; others may sell precursor products without offering finished products.”
Recent Darknet Market Busts
One notable example of law enforcement action in this arena is the bust of the Nemesis online market. The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) specifically cited the market’s involvement in the fentanyl trade as a reason for its closure. In this case, OFAC sanctioned several crypto wallets connected to the operator, Behrouz Parsarad, including 44 Bitcoin addresses and 5 Monero wallets.
As the landscape of cryptocurrency continues to evolve, the dynamics of darknet markets and their payment preferences remain a critical area of observation for both researchers and law enforcement agencies.
