By VINCENT OWINO

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Stablecoins, cryptocurrencies backed by physical assets, have now become the primary type used in illicit transactions the world over, putting on the line their reputation as a ‘better’ and more stable type of the generally unconventional digital assets.

The 2024 Crypto Crime Report published by blockchain research firm Chainalysis reveals that although the total amount of value transacted illegally in the crypto space last year dropped, the share done using stablecoins surged, maintaining a majority for the second consecutive year.

Of the $24.2 billion crypto value transacted illicitly last year, about 62 percent, or $15 billion, was done in stablecoins, as the share of Bitcoin, Ethereum and other cryptocurrencies in crime dropped to record lows.

Crypto crime value is the total amount that was either stolen from different users, or used in completing outlawed transactions such as cybercrime, sanction busting, money laundering among others.

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It recorded a 39 percent drop from 2022’s $39.6 billion, indicating progress by law enforcement agencies in cubbing the illegal use of cryptocurrencies, which have lately been emerged as a threat to global anti-money laundering and combating the financing of terrorism (AML/CFT) efforts.

The emergence of stablecoins, which have mostly been regarded as more conventional that the rest of cryptocurrencies, as the main medium of the illegitimate transactions in the industry, could threaten their use in the legitimate world, experts have warned.

“Stablecoins are the biggest use case in crypto right now, so of course this is a concern because they account for a bigger chunk of on-chain activity,” said Felix Macharia, chief executive of Kotany Pay, which uses stablecoins to process cross-border payments.

While the increased use of stablecoins in illicit activity comes alongside their overall growth, even in legitimate transactions, the forms of illicit activity in which they are used could put them under more law enforcement scrutiny, possibly stifling their growth.

“Some forms of illicit cryptocurrency activity, such as darknet market sales and ransomware extortion, still take place predominantly in Bitcoin,” said Chainalysis.

“Others, like scamming and transactions associated with sanctioned entities, have shifted to stablecoins. Those also happen to be the biggest forms of crypto crime by transaction volume, thereby driving the larger trend.”