The blockchain research firm is set to publish the full report later this month, which will provide some interesting insights into the use of cryptocurrencies around the world and how this differs across the various regions.
The Eastern European cryptocurrency landscape is an interesting one given that it is only the fourth-largest cryptocurrency market by transaction volume in comparison to the other regions analyzed by Chainalaysis.
However Ukraine and Russia rank first and second respectively on the research firm’s Global Crypto Adoption Index. According to Chainalysis these two countries top the list due to a disproportionately high cryptocurrency usage across the index, with more of its citizens moving financial activity to cryptocurrency than those of other countries.
The excerpt highlights the fact the actual amounts of cryptocurrency sent to and from these countries is lower than others, but these numbers are significant when taking into account the populations of Russia and Ukraine:
“In the 12-month period studied, we estimate that Russia has sent over $16.8 billion USD worth of cryptocurrency and received $16.6 billion, while Ukraine has sent $8.2 billion USD and received $8.0 billion. While those numbers are much lower than the amounts we see for China, the US, and other leading countries, they indicate a much higher level of adoption when we consider the size of both countries’ populations and economies.”
Lack of trust, familiarity with e-payments driving usage
The report highlights that a public trust is low in Russia in particular in regards to government, business and media. Fears of bribery, corruption and cronyism is driving this distrust and people are looking for ways to safeguard their own funds.
The report went as far as suggesting that it is common for businesses and individuals’ funds to be seized if they are on the wrong side of government officials.
“Distrust of banks and/or government financial policy famously inspired many of the original proponents of Bitcoin, and we believe it could also be fueling outsized adoption of cryptocurrencies in Russia, Ukraine, and other parts of Eastern Europe.”
Furthermore Chainalysis suggests that consumers in Ukraine and Russia are well-acquainted with electronic payment systems which has led to an easier shift to cryptocurrency usage. Another driving factor was the slow pace of development of the banking sector in the Eastern Block which led to major difficulties in simply transferring funds to different accounts and overseas.
“Payments systems developed in Russia following the Cold War allowed for significant financial crime. This may also be one reason behind the unique role crime plays in Eastern Europe’s cryptocurrency economy, as we’ll explore later.”
Darknet Hydra thriving
According to Chainalysis’ research, around 1.4% of Eastern Europe’s $41bln total transaction volume is set to illicit entities. Darknet markets account for the majority of Eastern Europe’s illicit transactions over the 12 month period between June 2019 and July 2020.
As a result Chainlaysis says that Eastern Europe accounts for the highest darknet market activity in the world.
The report identifies Hydra darknet marketplace as the biggest in the region. The platform ranks as the sixth-largest service by volume in the region. It’s a staggering fact considering that no other region has a darknet market in its top ten service providers by transaction volume.
Hydra reportedly processes over $1.2bln worth of cryptocurrency revenue between June 2019 and July 2020. Despite the fact that it only operates across Eastern Europe, Hydra is one of the largest darknet markets worldwide.
“As one of the largest darknet markets in the world, Hydra has built out a complex drug delivery system in Russia and other Eastern European countries, in which couriers receive delivery orders in a manner similar to Uber drivers and drop off packages in discrete locations broadcast to buyers later so that neither party ever has to see each other or make an in-person exchange. No other regions are comparable in terms of darknet market revenue or sophistication of operations.”