People in Russia and the U.S. were the source of over $284 million to illicit online marketplaces in 2020, blockchain research firm Chainalysis said in its latest report.
According to an excerpt from the firm’s upcoming “2021 Crypto Crime Report,” published Monday, online marketplaces providing illegal goods like drugs and fake IDs received a record-setting amount of cryptocurrency last year, equivalent to $1.7 billion. Russia, the U.S., Ukraine and China were the main areas of global money traffic to such platforms.
Darknet marketplaces receive most of their money through peer-to-peer crypto marketplaces and centralized exchanges, Chainalysis wrote. However, in 2020, the use of centralized exchanges increased, as did mixing services, which allow to obfuscate the participants in a cryptocurrency transaction.
Drug deal distribution
The report lists 10 countries where people are most actively interacting with dark markets: Russia, the U.S., Ukraine, China, the U.K., Venezuela, Vietnam, Turkey, India and Germany. Together, these nations were the source of $538 million to illicit markets during 2020 while people there received $403 million, Chainalysis said.
Russians sent around $169 million to the various darknet marketplaces, and received $119 million from such sites. Americans were second, with $115 million sent and $64 million received. In third place, Ukrainians sent $47 million and received $52 million.
“Generally speaking, drugs are grown or manufactured in Latin America and Asia and consumed in North America and Northern & Western Europe,” the report reads. “Darknet vendors and administrators typically launder funds through cryptocurrency services – often over-the-counter (OTC) brokers – in China or Eastern Europe. We can see some of this activity in the blockchain data associated with darknet market transactions.”
The biggest marketplace in the field by far is Hydra, a Russian-language drug marketplace that pocketed 75% of the entire global dark market revenue, Chainalysis said. Hydra was mostly responsible for the rapid growth in the global dark market revenue over the last year, while the income of other marketplaces didn’t change significantly between 2019 and 2020.
Hydra delivers drugs to buyers via “drops,” in which a delivery person hides the purchase close to a buyer and shares the geolocation of the package so it can be collected. In December 2019, Hydra announced it wanted to expand to other regions of the world and would hold a $146 million token sale. This was later put on hold due to the global coronavirus pandemic.
According to the data from Bitfury’s data firm Crystal Blockchain, currently, Hydra’s bitcoin addresses hold more than 521 BTC, worth over $18 million. Since 2011, Hydra has sent and received more than 439,000 BTC ($15.2 billion).
Chainalysis has been researching the various aspects of geography of cryptocurrency use for several years, although the firm admits locating such activity on the globe is a tricky task and such research has its limitations.
To see where in the world crypto markets are most active, Chainalysis looks into such data as web traffic on the particular services via SimilarWeb, time zones in which transactions take place, fiat currencies involved, languages and the location of the headquarters of the services, the firm’s head of research, Kim Grauer, told CoinDesk for a previous report on cryptocurrency adoption around the globe.
CORRECTION (Feb. 2 , 15:15 UTC): Fixes the dollar amount in the first paragraph.