Despite the introduction of privacy coins such as Monero, Bitcoin remains the “most abused” cryptocurrency by criminals, according to a new report by Europol's Internet Organized Crime Threat Assessment.
According to the report, Bitcoin (BTC) is the asset most frequently requested by ransomware gangs for payment, likely because it is easier for unsophisticated users to acquire than assets such as Monero (XMR).
Still, criminals tend to convert bitcoin into stablecoins to avoid market volatility, especially if they obtained it through investment scams, Europol noted. Law enforcement agencies are concerned about how effectively their persecution efforts will be thwarted, especially by non-compliant virtual asset service providers based overseas.
The report's authors also fear that the approval of a spot Bitcoin ETF could create new opportunities for scammers, as people with little cryptocurrency experience are more likely to dip their toes in Bitcoin-related investments that they don't fully understand, Europol wrote. Bitcoin ETFs also make the companies operating such investment products into large, centralized targets.
“Companies issuing crypto ETFs are required to hold large reserves in cryptocurrencies, potentially making them an attractive target for fraudsters,” they wrote.
Monero: A Rising Star in Crypto Crime
While Bitcoin remains the most widely accepted cryptocurrency by ransomware groups, the report specifically mentions that Monero is sometimes accepted as an alternative. Europol describes Monero as a privacy coin, noting that other cryptocurrencies are often exchanged for XMR to leverage its privacy features and make it easier to hide funds.
The report highlighted the growing use of cryptocurrency swap services for money laundering purposes, with Europol citing swaps for Monero and other privacy coins as a key method.
The report also mentioned a cryptojacking scheme uncovered in Ukraine in January 2024 that covertly mined more than €1.8 million ($1.95 million) worth of cryptocurrencies, including Monero, Ethereum (ETH), and Toncoin (TON).
Cryptocrime trends
Financial crime remains the main illegal use of cryptocurrencies, particularly investment fraud and money laundering. Europol claims that the rising price of cryptocurrencies and media attention has led to a further increase in investment fraud cases. Cryptocurrencies are the most commonly reported product offered in fraudulent investment schemes.
Tether (USDT), the US dollar-pegged stablecoin on Tron (TRX), has increasingly been embroiled in cryptocrime, possibly due to the network's low fees. Overall, the use of altcoins for illicit activities also appears to be on the rise, Europol said.
Underground banks are increasingly involved in laundering crypto assets. Crypto debit cards that can be quickly converted into cash at ATMs are also becoming more popular.
Privacy as an obstacle
Europol specifically states that privacy laws pose an obstacle for law enforcement. The report states:
“Mainstream E2EE [end-to-end encryption] “Communication platforms are increasingly being exploited by criminals,” the agency wrote, “and the current regulatory framework regarding the protection of personal communications over E2EE poses a challenge for law enforcement agencies. [law enforcement agencies] “Lawful access to criminal communications.”
The report further emphasized that Web3’s emphasis on decentralization will result in communications that are “not controlled or regulated by governments or private companies.”
Peer-to-peer (P2P) networks and blockchains are fully owned and controlled by their users, which Europol points out makes them ripe for crime to thrive.
“Decentralization, blockchain technology, and P2P networks will continue to provide opportunities for cybercriminals as they make it easier to conduct transactions anonymously and beneath the radar of authorities,” the authors write.
These statements follow a 2022 report in which a Europol spokesperson argued that cryptocurrencies offer new tools to law enforcement. The agency's representative noted that the anonymous nature of most blockchain networks and the ability to trace cryptocurrency transactions to some degree “offer unprecedented opportunities” to investigate organized crime and money laundering networks and ultimately recover stolen funds.
At first glance, these comments may seem in stark contrast to new concerns about the internet's increasing decentralization, but they're not. Rather, they demonstrate that decentralization is a double-edged sword. Europol doesn't mind that criminals use anonymous but public blockchains like Bitcoin, or instant messaging services that are encrypted but not end-to-end like most social media.
These tools leave plenty of traces on public blockchains and servers that investigators can later analyze to crack the case. Still, companies can't answer subpoenas with E2EE-protected user messages because, by definition, they don't exist. And there's no unencrypted transaction data on a blockchain like Monero.
This poses a major obstacle to law enforcement, Europol writes.
Decentralized services can also be nearly impossible to stop, meaning that even if they are discovered, law enforcement has no way to stop illegal activity. A good example of such a service is Tornado Cash, which has seen inflows of nearly $2 billion this year and is still fully operational, despite being an entity licensed by the Office of Foreign Assets Control.
Editor: Stacey Elliott.
