Bitcoin bandits are pretty much a myth – fewer than 1pc of transactions are illicit
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Digital currency bitcoin is not commonly used for criminal transactions, despite what some critics and policy makers say, a new report has found.
The study, by US think tank Foundation for Defense of Democracies, found that fewer than 1 per cent of bitcoin transactions via exchanges were illicit.
Of those illicit transactions, underground or “darknet” marketplaces such as Silk Road and AlphaBay were almost always the source, and tended to appear disproportionately in Europe.
“The total percentage of identified “dirty bitcoins” going into conversion services was relatively small,” the report found. “Only 0.61 percent of the money entering conversion services during the four years analysed were verifiably from illicit sources, with the highest proportion (1.07 percent) seen in 2013.”
Illicit transactions in our region (Oceania) accounted for just 0.97 per cent over the four-year period.
A number of Australian-listed small caps offer exposure to cryptocurrency including:
Elliptic, a UK cryptocurrency analytics provider crunched the numbers in the report using a forensic analysis tool that combines public blockchain data with a proprietary dataset of Bitcoin addresses associated with known entities.
(Blockchain is the technology all cyptocurrencies are built on. It provides a public ledger of transactions where each “block” is like a bank statement that is connected to other blocks to form a chain.)
Transactions between 2013 and 2016 were reviewed and transactions flagged where they were identified as coming from illicit entities.
A true person-to-person payment using bitcoins leaves a record of that transaction and the addresses involved in the blockchain. By tracing the conversion or transmission of funds that cannot be viewed, the study found those that were deemed “illicit”.
“Alternative payment methods bring new illicit finance risks when they are introduced to the public, but survive and eventually flourish when safeguards develop to address (but never fully eliminate) their criminal use,” the report’s authors concluded.