Bitcoin has long been a cryptocurrency that regulators have associated with criminal activity, including the trafficking of illicit goods and money laundering.

Ironically, because of all the mainstream attention it has received during its explosive growth in the last year, it’s become less attractive to criminals who wish to operate under the cloak of anonymity.

Rob Wainwright, Executive Director of Europol, sent out a tweet on Tuesday, saying that 2018 will see less use of Bitcoin by criminals, who favor alternatives that are more difficult for authorities to trace.

“The fact that Bitcoin is constantly in the spotlight makes it more valuable for investors, but certainly less valuable for its earliest fans — criminals — giving rise to interest in other alternative cryptos designed to avoid tracking,” said Daniele Bianchi, an assistant professor of finance at Warwick Business School.

How Regulation May Have Affected This

For much of the last year, the European Union’s leaders have been watching the cryptocurrency world with an eye on money laundering practices and the financing of terrorism. 

It wasn’t until the middle of December, however, that they took action with a series of regulations targeting cryptocurrency exchanges in the continent.

Now, buying Bitcoin at an exchange would effectively associate a person’s identifiable information with their wallet. Doing commerce like this is very unattractive to criminals who prefer that their identities be hidden.

Even if criminals would have their hands on the cryptocurrency through other more unofficial means, they have no idea if the recipients they send Bitcoin to are registered with an exchange. 

Either way, the risk of exposure is much larger than it used to be back when the market was entirely unfettered.

Criminals May Find Greener Pastures Elsewhere

A recent report by Europol shows us that “other cryptocurrencies such as Monero, Ethereum and Zcash are gaining popularity within the digital underground.”

Although Ethereum may experience the same treatment that Bitcoin has, Monero and Zcash are much more difficult for authorities to trace.

These cryptocurrencies are easier to mine than Bitcoin and specialize in anonymizing transactions recorded on the blockchain.

Zcash, in particular, has a special zero-knowledge protocol — zk-SNARKS — that can prove the knowledge of a transaction without revealing any information whatsoever about the parties involved. This includes their real wallet addresses.

Monero has a similar way of masking wallet addresses, although it isn’t sufficiently sophisticated to evade advanced heuristic analysis and could eventually be traced in some circumstances.

These attributes are probably the reason why even rogue countries like North Korea have grown fond of Monero.

A hacking group suspected to work for the North Korean government has been taking over corporate servers running out of South Korea and making them mine Monero for them.

The Road Ahead

Although authorities have concentrated primarily on Bitcoin, we’ll likely see them beginning to take measures to help combat criminal activity in both the Monero and Zcash markets.

The problem here is that no one really knows how to do this efficiently. If criminals are skilled enough at not giving themselves away, these cryptocurrencies will do the rest of the job for them.

If Monero and Zcash receive more mainstream attention, they will present unique challenges that were not present when Bitcoin was targeted by authorities.