BTC use on darknet increases in 2020, report finds

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BTC continues to be a financial tool for darknet entities, according to a new report by Crystal Blockchain.

The blockchain analytics arm of Bitfury recently released its “Darknet Use and BTC—A Crypto Activity Report,” which took a look at darknet entity interactions with digital currency exchanges and other darknet entities throughout the first quarter of 2020 in comparison to darknet activity from the past three years. 

The report discovered that “BTC continues to be a financial tool for darknet entities,” and despite digital currency exchanges and governments around the world keeping an eye on the blockchain and digital currency markets, darknet cash flows are on the rise.

Fewer darknet entities are using exchanges

The amount of BTC sent from darknet entities to exchanges that require users to verify their accounts significantly declined from Q1 2019 to Q1 2020, dropping from 14,073 BTC to 5,455 BTC.

The reason for this decline may be because more exchanges now require individuals to go through a Know Your Customer (KYC) or Anti-Money Laundering (AML) process before they can trade. During the KYC/AML verification, users must submit personal identification information.

That being said, darknet users are steering clear from these platforms that require them to reveal their true identities, in an effort to make it more difficult for law enforcement officials to trace illicit activities back to them.

“While more exchanges implement the FATF requirements, darknet users are trying to avoid the risk of unveiling their activity by those exchanges,” said Crystal Blockchain. “To veil darknet activities, they started to prefer mixing services to exchanges for withdrawal of cryptocurrency.”

BTC mixers became even more popular

Compared to Q1 2019, darknet entities sent significantly more BTC through mixing services in Q1 2020. 

“The amount of BTC sent to mixers by darknet entities rose significantly this year — from 790 total BTC in Q1 2019 to 7,946 BTC in Q1 2020,” according to the report. “The same growth was also observed in USD — an increase from $3m in Q1 2019 to $67m in Q1 2020. This indicates a rapid adoption of crypto mixing services by darknet entities.”

According to the report, in Q1 2019, only 1% of darknet BTC was sent to mixing services; however, in Q1 2020, 20% of darknet BTC was sent to mixing services.

Overall growth in darknet revenue

Crystal Blockchain also discovered that the percentage of BTC sent from one darknet entity to another grew from 10% in Q1 2019 to 19% in Q1 2020, which indicates overall growth in darknet revenue and cooperation.

One reason for this increase may be because darknet entities have begun working together to make it more difficult for onlookers to trace the true source and path of their funds.