Bitcoin, once the undisputed currency of choice for illicit transactions, has experienced a dramatic decline in its dominance on the dark web. Its share in illegal cryptocurrency activities plummeted from 97% in 2016 to a mere 19% by 2022, according to a comprehensive report from TRM Labs.
The projected decline appears even more stark for 2024, with Bitcoin expected to represent just 12% of illegal cryptocurrency activities. Tron now holds the top position at 58%, while stablecoins have captured 63% of total illicit transaction volume, based on separate findings from Chainalysis.
"The Bitcoin workaround was supposed to be there just to help with transition to XMR and as we are concerned, it's done, therefore we are now Monero only, just as planned," stated White House Market, one of the largest dark web marketplaces that ceased accepting Bitcoin in 2020.
Bitcoin's transparency has become its greatest liability in criminal enterprises. The cryptocurrency's blockchain functions as a public ledger where every transaction is recorded and visible, making it increasingly vulnerable to tracking by law enforcement agencies. When combined with additional data like IP addresses or exchange records, transactions can be traced with significant accuracy.
This fundamental limitation has enabled agencies such as the FBI to effectively use blockchain analytics tools from companies like Chainalysis and Elliptic. Their efforts have resulted in the dismantling of major dark web markets, including the Silk Road shutdown in 2013, AlphaBay in 2017, Hydra in 2022, and Incognito Market in 2024.
Technical challenges further diminish Bitcoin's appeal in illicit markets. High transaction fees and slow confirmation times have made it less practical for certain types of illegal activities. Privacy coins like Monero, Zcash, and Dash have filled this void by leveraging advanced technologies that ensure high levels of anonymity, making transaction tracking extremely difficult for authorities. Research from ScienceDirect has established a strong correlation between privacy coins and dark web traffic, reinforcing their growing popularity in illicit markets.
The shift presents a complex duality for the cryptocurrency ecosystem. Bitcoin's declining role in illegal activities may ultimately improve its reputation as a legitimate financial instrument, potentially leading to wider acceptance among mainstream users and investors. This transformation could accelerate its integration into conventional financial systems.
However, the migration toward privacy coins and stablecoins has created significant challenges for law enforcement. Despite the development of sophisticated blockchain analytics tools capable of detecting transaction trails through mixers and tumblers, tracking privacy-focused cryptocurrencies like Monero remains exceptionally difficult. In July 2024, Elliptic researchers uncovered $11 billion in illicit trades using USDT on Cambodia's Huione Guarantee marketplace, highlighting the scale of the problem. That same month, Japanese law enforcement made the country's first arrest linked to Monero transaction analysis, marking a potential breakthrough in tracking privacy coins.
Regulatory responses have varied globally. Some countries have implemented outright bans on privacy coins, while stablecoins have been subjected to increasingly stringent oversight. The balance between technological innovation and regulatory control continues to evolve as authorities struggle to maintain transparency and security in digital financial ecosystems.
The transition from Bitcoin to privacy coins and stablecoins in dark web transactions represents a clear trend driven by criminal demand for anonymity and efficiency. While Bitcoin maintains relevance in certain crypto-related crimes, its inherent transparency has rendered it increasingly unsuitable for users seeking to avoid detection. Meanwhile, privacy-focused alternatives have emerged as the preferred choice for those operating outside the law, creating an ongoing cat-and-mouse game between criminals and the authorities tasked with tracking them.