According to a DEA agent, criminal activity accounts for only 10 percent of on-chain bitcoin transactions, down from a high of 90 percent in 2013. Speculation is now the main purpose of bitcoin transactions.

According to a DEA agent, criminal activity accounts for only 10 percent of on-chain bitcoin transactions, down from a high of 90 percent in 2013, CCN reports. Speculation is now the main purpose of bitcoin transactions.

In an interview with Bloomberg, US Drug Enforcement Administration (DEA) officer Lilita Infante said that, five years ago, criminal activity was behind about 90 percent of bitcoin transactions. Now, illegal activity has shrunk to about 10 percent and speculation has become the dominant driver. Infante said:

"The volume has grown tremendously, the amount of transactions and the dollar value has grown tremendously over the years in criminal activity, but the ratio has decreased. The majority of transactions are used for price speculation."

This confirms the findings of the office of Quebec Chief Scientist Rémi Quirion, covered by CCN in April: There is no meaningful connection between Bitcoin and criminal activities, primarily due to the fact that Bitcoin transactions are not anonymous and can often be quite easily tracked by law enforcement agencies. The office's report states (CCN translation of the original in French) that:

“Bitcoin is not above the law, nor is it a magnet for illicit transactions: it forms only a tiny part of the criminal money circulating around the planet. The reason: it is less attractive for anyone who wants to make transactions without leaving a trace.”

In fact, bitcoin transactions are pseudonymous, not anonymous. While bitcoin addresses can't be directly tied to users, most bitcoin users don't follow the all-important privacy measure that was already recommended in Satoshi Nakamoto's original bitcoin white paper: "a new key pair should be used for each transaction to keep them from being linked to a common owner... The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.”

See also our short guide to bitcoin privacy and anonymity. There are ways to use bitcoin privately, but using them requires watertight discipline, and one slip can be used by law enforcement agencies to unmask bitcoin users.

Infante said that, while privacy-oriented cryptocurrencies like Monero and Zcash are more anonymous than bitcoin, the authorities still have ways of tracking them.

Criminals are and will likely continue using bitcoin and other cryptocurrencies, but Infante is persuaded that this actually helps law enforcement. The DEA agent said:

“The blockchain actually gives us a lot of tools to be able to identify people. I actually want them to keep using them."

So, the Wild West world of cryptocurrencies is settling down to a more sedate routine: That a first wave of criminals is replaced by a second wave of speculators is not unheard of in frontier economies, and the crypto-economy is most certainly a frontier economy.

But frontiers are eventually taken over by farmers and average citizens. Hopefully there'll be another shift in the crypto-economy, after which routine use of cryptocurrencies for legal transactions, from buying a coffee to buying a company, will be the dominant factor.

I have argued that we should make an effort to use bitcoin as it was intended, as private digital cash in a parallel economy independent of the government, to purchase goods and services, without ever exchanging bitcoins for fiat currencies.

Image from Pixabay.

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Crypto Insider Editor Giulio Prisco is a writer specialized in science, technology and business. He is persuaded that crypto has the potential to bring disruptive positive changes to the internet and society at large.

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