Bitcoin Use Linked to Fraud, Crime? Watch out for This Factor in BTC Market Analysis


In the fast-emerging world of crypto, Bitcoin is King – BTC has long  been the focus of the lion’s share of interest and adoption in blockchain technologies.

Now, some are sounding the alarm bells about the potential for fraud and crime linked to Bitcoin use.

Jonathan Levin is the co-founder and COO of a firm called Chainalysis, a business that looks into instances of cybercrime. In an interview with Fortune released this morning, Levin reveals that a full 95% of all crypto crimes tracked by Chainalysis involve Bitcoin.

“Levin said the records left behind by crypto transactions has led to many arrests, as officials in the United States tackle the deadly opioid crisis and try to stem the flow of illegal drugs into the country, often from China,” writes Thomas Simms at Cointelegraph, deciphering the executive’s remarks.

A major part of Levin’s warning involves “darknets” – areas of the Internet that are walled off from public access. Think of them as shadowy “side parlor rooms” in the virtual mansion, to which only certain account holders have keys. Building on the infamous legacy of Silk Road, these scions of the Dread Pirate Roberts have set up back rooms where they can conduct their nefarious business unhindered by law enforcement or other prying eyes.

Levin was also specific about some of his claims:

“What we’ve seen is that there is the ability to tie some of those cryptocurrency transactions either to the pharmacies in China or actually to the services that people are using to distribute fentanyl,” he told Fortune.

These types of reports mean a lot to investors, because the potential for cybercrime, fraud, theft and illicit behavior is arguably the biggest Achille’s heel for BTC in the markets. We see institutional adoption and buy-in happening this spring, but it would only take a tipping point in terms of perceived liability for firms to switch quickly to some other coin, and leave BTC in the dust.

“Bitcoin has been criticised because of its lack of transparency and inability to comply with anti-money laundering and counter-terrorism legislation,” write analysts at law firm Norton Rose Fulbright. “Reputational issues have arisen again following the recent arrest of the Chairman of the Bitcoin Foundation for money laundering and connections to the notorious Silk Road drug marketplace.10 Many have noted the link between Bitcoin and online criminal activity, such as illicit drug markets like Silk Road. The pseudonymous nature of Bitcoin means that businesses trading legitimately may have no means of knowing where the currency they receive has come from or where their payments are going, risking unwitting involvement in illegal activity. Businesses also face the risk of fraud by suppliers taking advantage of Bitcoin’s irreversible transactions. Similarly, consumers falling victim to fraudulent sellers do not have the benefit of consumer protection legislation.”

To stay prepared for a change of headwinds in crypto and BTC in particular, keep an eye out for ominous signs that naysayers like Nouriel “Dr. Doom” Roubini and others have succeeded in warning enterprise away from BTC building.