Do cryptocurrencies serve the drug trade? For some time now, both topics have been linked in the media. China is now providing new insights that show that this is not entirely wrong.
Cryptocurrencies are becoming increasingly popular with drug dealers
According to a new report by nncc626, the popularity of drugs in China is declining. According to information from Chinese authorities, the number of drug abuse will decrease by 17.5 percent from 2020 to 2021.
At the same time, however, the authorities also notice significant changes in the processing of drug transactions. Previously, bank transfers played the largest role in the detected drug trade.
Since 2021, retailers and users have been adapting strongly to the changed possibilities. Since then, the use of cryptocurrencies has increased enormously. It is particularly unusual that drug transactions are also settled via in-game currencies.
The reasons for this development are numerous. The use of cryptos and in-game money often works much faster and therefore easier than using conventional methods.
In addition, the participants are trying to escape the fiat money system and thus the enormous surveillance by banks and authorities.
Drug trafficking is increasingly taking place via the Internet
Ross Ulbricht, founder of the Darknet Markets Silk Road, is serving a life sentence in the US prison in Tucson for illegal business on his marketplace. In the crypto scene, he still holds a legendary status with many users.
The reason for this is that Ulbricht was one of the first people to recognize the benefits of Bitcoin and made it a trading currency on the Silk Road.
Many other marketplaces are operating according to this model today. Instead of Bitcoin, however, the privacy coin Monero is mostly used there. The increasing importance of the Internet for drug trafficking is also striking Chinese law enforcement agencies.
Due to the growing simplicity of the business, the amount of postponed funds and drugs is also increasing. In 2021, according to official estimates, the share of online business in the total drug trade in China was 9.2 percent.
China refers to these operations as contactless drug smuggling. The contacts are made via well-known chat apps, dedicated applications, second-hand marketplaces, video games or the Darknet.
After payment, the shipment of the drugs simply takes place via the post office or by its own drivers. Most users do not mention their real names.
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Are China’s Anti-crypto measures Ineffective?
Since 2021, China has been pursuing a hard course towards cryptocurrencies. Since last year, there has been a complete ban on digital assets in the Asian country. But the prohibition policy seems to have its pitfalls.
Bitcoin as the first cryptocurrency was created with the aim of growing personal responsibility of users. Enormous monitoring and control, as is known from classical systems, should finally be a thing of the past.
Nevertheless, Chinese authorities are prosecuting users and miners of cryptos. In the case of Bitcoin, China’s success was measurable, at least for now. Large Bitcoin farms are hard to hide from authorities and home mining has long been history.
Recently, however, it has become apparent that the Chinese are actually managing to maintain underground mining operations.
China Continues to Be Top Location for Bitcoin Miners Despite Mining Ban
Despite the mining ban, Chinese continue to mine BTC, making China the top location again. This is how Bitcoin mining works underground.
In order to decentralize mining to a greater extent than is the case with Bitcoin, various cryptocurrencies decide to keep their mining algorithms ASIC-resistant. Monero is one of these examples.
These algorithms ultimately prevent the emergence of mining centers and promote home mining. This makes the respective network less vulnerable.
How effective China’s measures against cryptos are cannot be determined from the report. This requires a comparison with this year’s report on the Chinese drug trade, which will not be published until 2023.
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