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Criminals Prefer Tether More Than Bitcoin: Elliptic

2 mins
Updated by Geraint Price
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In Brief

  • Criminals are increasingly favoring stablecoins like USDT and USDC over Bitcoin for illicit transactions.
  • Bitcoin's share in illicit volume dropped from 97% in 2020 to 19% in 2022, as its darket popularity wanes.
  • Criminals swapped $4.1 billion in crypto using smart contracts that obscure the origin of illegally-obtained funds.
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Elliptic’s former head of technical crypto advisory, Tara Annison, said that stablecoins have replaced Bitcoin as the crypto asset of choice for criminal activity, with mixers also playing an increasingly important role.

Speaking on the last day at EthCC 6, Annison argued criminals favor Tether (USDT) and USD Coin (USDC) because they are easy to obtain.

Stablecoin Criminal Activity Surges on TRON

In particular, Annison said criminal activity seems to be flourishing on the TRON network. USDT issuer Tether said in 2019 its dollar-pegged asset can be used on TRON.

“It’s also super easy to get really good value out of it. What we’re seeing now is more and more USDT addresses.”

Stablecoins are being used for criminal activity as revealed by the flows to banned addresses. The popularity of mixers is also increasing.
The increasing use of stablecoins in criminal activity | Source: Tara Annison

On the other hand, Bitcoin (BTC) flows made up 19% of illicit volume in 2022 compared to 97% in 2020. The oldest cryptocurrency accounted for under 10% of sales on darknet marketplaces in 2022, TRM Labs confirmed earlier this year.

While stablecoin issuers can freeze assets at addresses linked to criminal or terrorist activity, privacy critics argue this practice undermines the censorship-resistant nature of cryptocurrencies.

US Lawmakers reintroduced stablecoin legislation in Congress after USDT and USDC depegged from $1 multiple times in the last 18 months. Europe’s Markets in Crypto-Assets bill limits stablecoin spending, while Hong Kong said upcoming legislation would provide guidance on stablecoins.

Bridges and Mixers Process $4.1 Billion in Criminal Proceeds

According to Annison, criminals also swapped $4.1 billion in crypto using mixers and bridges, essentially smart contracts that lock deposited tokens on a source blockchain to mint their equivalent on a new blockchain. 

Last year, the US Treasury Department sanctioned several addresses associated with the Ethereum mixer Tornado Cash. Mixers pool funds from multiple users, hiding the origins of individual contributions.

For example, criminals can mint wrapped BTC on Ethereum (ETH) by sending Bitcoin to a bridge smart contract. The ERC-20-compatible wrapped Bitcoin minted on Ethereum can then be sent through an Ethereum-compatible mixer.

Novel Crypto Scams on the Rise

Zooming out, a report from TRM Labs earlier this year revealed several new scams that crypto fraudsters introduced in the last year.

Dig deeper into the most common crypto scams here.

One is a scheme to pose as a seller of sexually exploitative material involving minors in exchange for crypto. The criminal makes off with the buyer’s funds, leaving them without recourse.

Other newer scams involve coercing people into call centers that scam call crypto investors. Under threat of violence, the scam operators must carry out pig-butchering to earn money for their bosses.

Corrupt entities sell exchange underperformers from these call centers through Telegram groups.

Got something to say about the use of stablecoins for criminal activity or anything else? Write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or Twitter.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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