Drug money in 2021: Cryptocurrencies accounted for R26 billion of it – report

Cryptocurrencies accounted for $1.8 billion (R26.4 billion) of drug money revenues in 2021, according to research by Banklesstimes.

This, it says, represents 85% of the total revenue generated in these ‘darknet markets’.

The darknet is a part of the internet where communications and transactions can be done anonymously and is often used by criminals (though it is also used by activists, whistleblowers, journalists and news organisations for secure communications).

Some 15% in darknet revenue – equivalent to $300 million (R4.4 billion) – was generated by so-called fraud shops, which include the selling of stolen logins, credit cards, among others.

The revenue from darknet traders could be higher, says the study.

Reports indicate that an additional revenue of $112 million (R1.65 billion) was generated from direct buyer-to-seller sales, without going through the darknet markets.

Clampdown

Banklesstimes says there were several darknet market closures in 2021, and by the end of the year, there were five fewer fraud shops and 13 less drug markets.

“We should also note that the drug markets have been on a decline over the last five years. The number of active users declined from about 1.7 million in 2016 to 1.2 million in 2021.

The number of transfers also dwindled from 11.7 million to 3.7 million.”

Despite a decline in the number of users and illegal markets, revenue from crime-focused sales actually increased.

“Users in the drug-focussed markets are now making bigger payments for every transaction. During the same period, the average size of a transaction has increased by more than 208%, from 2016’s $160 [R2 358] to $493 [R7 266] worth of crypto in 2021,” says the report.

In 2021, direct transactions contributed about 5% of total darknet market revenue, which has been on a steady rise for the past three years.

“Typically, these direct relationships start on darknet markets but later move to off-market transactions after enough trust has been established between the trading parties.

The total revenue from such transactions in 2021 was $112 million [R1.65 billion].

“On average, a typical buyer sent $8 331 [R122 800] worth of cryptocurrency to their vendor during the year.”

Darknet markets

Hydra, a market designed for Russian-speaking countries, continues to dominate global darknet markets.

Hydra’s revenue in 2021 accounted for about 80% of the entire darknet market’s revenue, according to the US Department of Justice (DoJ).

Other darknet markets include DarkMarket, ByPass Shop and Flugsvamp Market.

A joint law enforcement effort by the DoJ and German authorities led to the seizure and closure of the Hydra market on April 5 this year.

The DoJ also brought criminal charges to one of the market’s alleged operators.

“The Hydra darknet site provided a platform for criminals who thought they were beyond the reaches of law enforcement to buy and sell illegal drugs and services,” said Jim Lee of the US Internal Revenue Service Criminal Investigation agency in a DoJ statement.

“Our Cyber Crimes Unit once again used their cryptocurrency tracking expertise to help take down this site and identify the criminal behind it.

“Denying criminals a space to operate freely to conduct their nefarious activities is the first step in stopping this activity from happening altogether.”

“The successful seizure of Hydra, the world’s largest darknet marketplace, dismantled digital infrastructures which had enabled a wide range of criminals – including Russian cyber criminals, the cryptocurrency tumblers and money launderers that support them and others, and drug traffickers,” said FBI Director Christopher Wray.

Hydra vendors offered false identification documents, allowing users to search for their desired type of identification document – for example, US passports or drivers’ licences.

Many vendors offer false identification documents using photographs or other information provided by the buyers.

Hacking tools and services are also available through Hydra. “Hacking vendors commonly offered to illegally access online accounts of the buyer’s choosing.

In this way, buyers could select their victims and hire professional hackers to gain access to the victims’ communications and take over the victims’ accounts,” according to the DoJ.

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