Is Bitcoin Really Primarily Used For Illegal Purposes?

A study suggests the Blockchain ledger can actually be used to identify illicit transactions and thus significantly minimize illegal payments with Bitcoin.

“The broad generalizations about the use of Bitcoin on illegal finance are vastly exaggerated,” writes Michael Morell in his study titled ‘An Analysis of Bitcoin’s Use in Illicit Finance’. 

Even more so, the study suggests law enforcement could actually use the Bitcoin blockchain ledger to identify illicit transactions and thus significantly minimize illegal payments. 


The authors of this report interviewed and consulted a diverse group of experts in cryptocurrency, payment systems, law enforcement, financial regulation, global intelligence and more, to come up with these results. 

How much of Bitcoin activity is actually illegal?

There is a widespread perception that the Bitcoin market is rife with illegal activity, with many citing various high-profile events to support their claim.

More and more every day, it seems that articles and reports of terrorists and criminals using Bitcoin are popping up in the media. This, combined with government officials warning the public of the dangers of Bitcoin and how it’s turning into a tool for criminals, seems to have created a consensus that “Bitcoin is Bad”.

bitcoin illegal
Credit: ‘An Analysis of Bitcoin’s Use in Illicit Finance’.

In actuality, according to the study, only 1 percent of all Bitcoin transactions were used for illegal purposes from 2012-2020. Meanwhile, overall illegal activity in the economy using conventional financial intermediaries range from 2 to 4% of global GDP

While it is true that most of the illicit activity concerning cryptocurrencies can be found on Bitcoin, the authors of the study attribute it to the popularity of Bitcoin compared to the other alternative coins. After all, it is the coin most often found in DNM wallets. 

Does this mean that Bitcoin in the hands of the wrong people is dangerous, might pose immediate damage, and cause the rise of more crime? The opposite might be true. 

The blockchain ledger is a powerful forensic tool 

The blockchain ledger, which records Bitcoin transactions, is a forensic method that is underutilized. Law enforcement, as well as the intelligence community, can use it more broadly to detect and disrupt illegal activities. 

“[It] is easier for law enforcement to trace illicit activity using Bitcoin than it is to trace cross-border illegal activity using traditional banking transactions, and far easier than cash transactions,”

says currently serving official at the CFTC (Commodity Futures Trading Commission) to support this claim. 

One of the experts interviewed by the authors of the report, says that it is far easier to catch illicit actors using blockchain. In fact, it is believed that if blockchain is used in all criminal activity, the illicit financial activity could be completely wiped out. 

Simply put, blockchain research is an extremely powerful crime-fighting and intelligence organization tool for collecting information.

“Based on our research, I have come to believe that if there was one financial ecosystem for bad actors to use that would maximize law enforcement’s chances of identifying them and their illicit activities, it would be blockchain,” writes Morell.

writes Morell.


New innovations almost always have both major societal benefits and negative externalities. It is the responsibility of government officials to create policies that enable the benefits to thrive while safeguarding us from the disadvantages.

Being a newly introduced technology, hardly understood by the public, it is somewhat expected that crypto is seen as an alien, alarming concept. Additionally, negative news has a tendency to gain much more traction than those with a more positive tone. 

Lastly, Bitcoin appears to be a disruptive threat to conventional financial firms due to its decentralized existence. Governments will be responsible for determining how to effectively use and control blockchain technology in the international interest. 

For now, it is important that we are cautious, but also that the public, as well as our policymakers, have these discussions about Bitcoin relying on facts. Going forward, that is the only way governments can make decisions that all of us will benefit from, without missing out on possibly disruptive and transformative innovations. 

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