Cryptocurrencies Contributed $1.8B of Drug Money in 2021

There’s no denying that cryptocurrencies present more than a handful of advantages. However, we cannot deny that they are quickly becoming a favorite tool of trade for criminals.

Reports by Banklesstimes show that in 2021, drug-focused markets brought in a $1.8 billion revenue worth of cryptocurrency. This amount was more than 85% of the total revenue from Darknet markets. Fraud shops, the only other contributing market, accounted for roughly $300 million of the total $2.1 billion. The fraud shop market includes selling stolen logins, credit cards, and more.

But, the revenue amount could be higher. Reports indicate that an additional revenue of $112 million was generated from direct buyer-to-seller sales, without going through the darknet markets.

Number of active markets drop despite increasing revenue

There were several market closures in 2021, and by the end of the year, there were 5 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.

With such ongoing declines, you’d expect the industry’s revenue to also decrease. But that’s not the case. BanklessTimes notes that although the revenue generated from thes crime-focussed industry was on the rise, the actual number of active markets is decreasing.

The increase in the revenue generated from these markets is thus attributed to larger transaction volumes, which does more than compensate for the fewer markets.

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 to $493 worth of crypto in 2021.

Direct buyer-seller transactions changing the darknet markets

In 2021, direct transactions contributed about 5% of the total Darknet markets revenue, which has been on 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. On average, a typical buyer sent $8331 worth of cryptocurrency to their vendor during the year.

Russia-based Hydra dominates darknet markets

Further analysis of the markets indicate that Hydra, a market designed for Russian-speaking countries only continues to top the global darknet markets.

Hydra’s revenue in 2021 accounted for about 80% of the entire darknet market's revenue, which is roughly $1.7bn. Other darknet markets, including DarkMarket, ByPass Shop, and Flugsvamp Market were in much closer competition in the total revenue generated during the year.

Interestingly, coordinated efforts of the Department of Justice (DOJ) and the German authorities led to the seizure and closure of the market on 5th April 2022. The DOJ also brought criminal charges to one of the market’s alleged operators.