5 Crimes Committed Using Cryptocurrency

Do cryptocurrencies make it easier to commit a crime? 

Many illegal concerns have been raised following the rise of Bitcoin and other cryptocurrencies as a whole. Even if Bitcoin and the concept of cryptocurrency are already a decade old, a lot of people are still not acquainted with it. This is probably why it is easier for some wily individuals to use cryptocurrency as a tool to doing something illegal. But there is also another side to that: What if the person just didn’t know that what they were doing was illegal? 

Tax evasion 

This is the most common crime a person may commit through cryptocurrency. A large part of the illegality comes from sheer ignorance. It’s bad enough that not all people are actually familiar with how tax dues are computed, factoring in cryptocurrency makes tax issues even more complicated. The tax guidelines using Bitcoin are quite unclear. There is no Internal Revenue Service (IRS) tax form that allows tax payers to jot down Bitcoin activities for tax purposes. The tax payer actually has to record all cryptocurrency activities themselves, no matter how small the transaction is, for tax purposes. But how can you remember all transactions. Just a few misses and you could be in danger of being accused of evading tax payments.  

According to reports, only 807 people reported cryptocurrency activities in the US in 2015. This is a disturbingly low number since 2.8 million people in the country actually have their own cryptocurrency. So what happened to the 2,799,193 people using cryptocurrency? Well, it’s quite possible that a lot of them owned cryptocurrency but never actually used them. There would be quite a number of them also who inadvertently left out reporting of the digital currency activities because they didn’t think that they have to. Some may have thought that since they were not making substantial money off it, then they didn’t need to report to the IRS. It’s not like any IRS form provides any space for tax payers to list down Bitcoin movements. So maybe there were some who purposely left out Bitcoin hustle in order to avoid paying taxes for them. Whether it was done on purpose or not, one thing is for certain, the IRS is concerned.

The IRS is, of course, concerned about getting the right amount of taxes due to the government. It is quite diligent about collecting taxes, too. So with the possibility of tax evasion through such a new concept, the tax collecting agency has focused its probing tasks on cryptocurrency exchanges. Tax payers with cryptocurrency ties are supposed to report gains or losses on their taxes. But apparently, 36 percent of Bitcoin owners are saying they did not report any gain or loss from the digital monetary system.  

Will tax evasion through cryptocurrency be detected?

Pinpointing tax evasion through cryptocurrency will not be that easy, though. So the IRS really has its work cut out for them. It is actively improving its system in order to successfully determine whether a Bitcoin user was trying to evade paying taxes or not. There are platforms, though, that actually keep logs of Bitcoin and other cryptocurrency. Trading platforms also report to the IRS. But unless the IRS makes guidelines specific to the use of Bitcoin and cryptocurrency, then the problem of tax evasion, whether intentional or not, will continue to bug the government. It may just be a matter of time before the IRS will truly do something about it considering that cryptocurrency is gaining interest. There might come a time when cryptocurrency becomes a regular payment tool like any other foreign currency or even credit card. For now, reporting gains and losses from cryptocurrency is the sole responsibility of the Bitcoin owner or user. But if the IRS really wants to ensure that everything is reported, the agency will make things easier for the tax payer. 

Illegitimate transactions 

It’s not just the IRS that is wary about the use of cryptocurrency, the law enforcers are also troubled by the popularity of this digital platform. This is because it’s quite easy and convenient to use for fraudulent activities. The most basic reason why cryptocurrency is attractive to criminals is because you don’t need to use your real name to be an owner or user. Just like a lot of other online platforms, you go by a username in the cryptocurrency world. So you can actually use a name that doesn’t give away your real identity. Identifying a person just through a username could be difficult.  

There is that place on the Internet called Darknet, which is typically hidden to the public. Of course, it’s a playground for the highly technical people who are involved in illicit activities. When transactions are in place, Bitcoin or any other form of cryptocurrency becomes the perfect mode of payment because it could not be easily traced. Credit cards are very easily tracked. Cryptocurrency provides anonymity in that part of the world that is also anonymous to average Joes—exactly how criminals want it. 

According to, 97 percent of illegal activities made in the Darknet realm were through Bitcoin transactions. That’s a lot! It’s also been reported that the most popular Darknet purchase is drugs. Darknet became a venue for about 1,400 drug peddlers to make about $1.2 billion in drug transactions. There were about 13,000 drug listings, according to the same report. Transactions became even more covert and popular with the launching of what was called Silk Road in 2011. It has become known as the “eBay of drugs.” The irony is that most techno-savvy people would say that the discovery of the Silk Road was an important technological advancement, many more would argue negatively. Well, statistics already proved that Silk Road became the gateway for criminal activities. It paved the way for the seamless application of irregular transactions using cryptocurrency, particularly Bitcoin. The factors that make Darknet successful were anonymity of internet use and cloak of darkness when it comes to illegal transactions.  

Other illegal transactions perpetuated in Darknet are unlicensed weapons, fake identification cards and passports, hired killers. Yes, murder can be transacted using cryptocurrency. That’s the truly dark side of Darknet. Bitcoin is also getting a new competitor in the form of Monero, an open source cryptocurrency created in 2014. Bitcoin has been in the industry for a decade, which is why it is the most popular cryptocurrency in general, and not just on Darknet. But apparently, Monero is even more attractive to criminals. So it has become the second go-to cryptocurrency for illegal transactions. 

Money laundering 

Experts have said it is not easy to launder money using Bitcoin or any other cryptocurrencies, but it can be done. And just like using such other nefarious transactions, the main attraction is always the anonymity in using digital currency. Cryptocurrency has low liquidity, which makes it not ideal for money laundering. But in Europe, it is reported that about four percent of proceeds from criminal activities are laundered through cryptocurrency. Europe was singled out because it is the top location for Bitcoin laundering in 2016. The percentage of four percent may sound low, but that’s actually quite a substantial amount of money. Also, the percentage indicates that money laundering through cryptocurrency is not that popular, but you have to bear in mind that cryptocurrency has only been around for a decade. It is still relatively young; criminals still have a lot of time to develop strategies on how to maximize money laundering using digital currency.  

Back on the issue of Europe being a top destination for Bitcoin laundering, about 56.65 percent of such activity was done in the continent. Only 5.28 percent happened in North American shores, while 1.21 percent was in Asia, which has a stricter cryptocurrency rules. Zero percent was reported in Africa while there was less than a percent reported in both Oceania and South America. But a large bulk, 36.44 percent, came from unknown jurisdictions. This just goes to show that cryptocurrency can still be untraceable.  


Yet another criminal activity attached to Bitcoin and cryptocurrency transactions is Ransomware extortion. This is the process wherein a malicious software or bug infects your computer and threatens to shut you out of your computer, delete all your data, or release all your data to the public unless you pay the criminal off. Ransomware extortion has increased exponentially because of Bitcoin and other cryptocurrencies. The reason for this goes back to why digital currency is very attractive to criminals: anonymity. So criminals will demand to be paid in Bitcoins because it is not easily traced to their actual identities. 

Statistics back this up. According to reports, between 2015 and 2016, there was a 300 percent increase in Ramsomware extortion in the US. There were at least 1,000 attacks per day in 2015, which increased to 4,000 extortion activities per day in 2016. Bitcoin was the most popular mode of ransom payment because it was the easiest way to elude notice from law enforcements. Ransom demanded ranged from $200 to $10,000. According to victims, they were willing to cough up to $100.  

Ponzi scheme 

If Ponzi scheme or the pyramid scheme could be done with actual funds, then it could be done using Bitcoin or any other digital currency. In fact, some people, including former Israeli Prime Minister Ehud Barak called cryptocurrency a Ponzi scheme itself. The most popular characteristic of the Ponzi scheme is that the earliest investors also make the most money. The same could essentially be said of cryptocurrency with the earliest Bitcoin owners now among the richest. However, this is mostly because of the valuation of the Bitcoin. In the case of the Ponzi scheme, the earliest investors actually make money off the investment of the latest addition to the company. So, no, Bitcoin is not a Ponzi scheme. Bitcoin could, however, be utilized in a Ponzi scheme.  

In 2018, cryptocurrency expert Amit Bhwardwaj was arrested for masterminding the $300 billion Ponzi scheme using cryptocurrency. He allegedly victimized over 8,000 people. In early 2019, Bitcoin artists in Taiwan were also charged for scamming local and foreign investors with over $51 million using Bitcoin investment that promised a return of investment of about 355 percent.  

Anything criminal, though, should not be reflective of how Bitcoin, Monero and cryptocurrency, in general, actually work. Cryptocurrency expands the versatility of your financial activities. You now have more ways to make financial transactions, and you don’t even need to carry wads of cash. There is no longer a need to bring a wallet, just your phone, which is essentially an extension of your life anyway. So crimes should not be blamed on cryptocurrency.  

Let’s be real, crimes can be committed with any kind of tool: gun, gadget, knife and many others. But somehow, since Bitcoin is like the new kid on the block, people are zooming in on it as a crime tool. Yes, cryptocurrency can be used for crimes—so are the more nefarious devices out there. Actually, anything can be used in illegal activities when the criminal is intent on doing something illegal. There is just this unfair focus on Bitcoin because of its novelty. It’s a new way to commit a crime so many people think negatively about it without realizing that by doing so, they have just regarding the other more dangerous tools as kind of normal. People should not watch out for Bitcoin in terms of criminal activities, they should watch out for everything. Bitcoin is just one of the hundreds or so things that could be used in committing crimes.  

On the other side of the coin, though, crimes done through cryptocurrency could eventually lead to a criminal’s fall. Bitcoin blockchain prospers on transparency. It records transactions between transacting parties efficiently. In fact, a number of blockchain platforms already report to the IRS for tax purposes. This nature also means that it breeds global transparency so that the community could easily watch over and note cryptocurrency transactions. There are also ways for law enforcement to track criminals through bitcoin blockchain. In other words, bitcoin blockchain is the key to stopping crimes made through Bitcoin and cryptocurrency.  


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What are the crimes or illegal activies done using cryptocurrency

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