In a research by Chainalysis, Ukraine and Russia rank first and second respectively to adopt cryptocurrencies like bitcoin. Even though most of this activity is legitimate, Eastern Europe leads in darknet marketplaces and ransomware schemes.
Ukraine and Russia rank as the top two countries in the Chinalysis Global Crypto Adoption Index. It cites lack of trust in the government, cronyism, and corruption as possible catalysts that fueled the increase. Approximately 85% of Eastern Europe crypto transfers are described as professional-sized, whereby they are worth more than $10,000.
Hydra Ranked Sixth in Cryptocurrency Volume Traded
The Russian darknet market, Hydra, has ranked sixth in the volume of cryptocurrency service in the region. It goes on, outranking cryptocurrency exchanges such as Kraken and BitMex, which are legal. Chainalysis concludes that Eastern Europe accounts for more general darknet market-related cryptocurrency activity than any other region.
The Chinalysis report estimates that Hydra generated more than $1.2 billion in crypto revenue between June 2019 and July 2020. The platform is among the world’s largest darknet marketplace despite only servicing Eastern Europe.
The report estimates that 1.4% of Eastern Europe’s $41 billion 12-month crypto volume gets sent to illegal entities. Latin America is slightly ahead, with 1.6% of the total transfer volume going to illicit platforms. However, the entire total transfer volume in Latin America is smaller.
Eastern Europe, named the highest-earning ransomware network administrators and ransomware-as-a-service operators, has 23% of the global transfers destined for these addresses. Despite the high illegal trading, Chinalysis notes that significant adoption of crypto assets for legitimate purposes is high in Eastern Europe.
Behind High Crypto Adoption in Eastern Europe
The study found that Eastern blocs’ digital payments infrastructure is somewhat fragmented, compared to many western countries. With this, there is an allowance for homegrown technologies and payment methods to thrive in an underground market operating below the regulation surface.
Despite the dubious regulation around Eastern European cryptocurrency markets, it is evident that the region will experience growth. The push towards regulation and standardization appears high on the list as state officials push towards stringent rules surrounding possession and digital assets usage.
According to Roman Sannikov, a Russian cybersecurity specialist, the high volume of legitimate cryptocurrency use in Eastern Europe is a legacy Soviet Union and its collapse. Former Soviet citizens did not have adequate access to the global banking system for about a decade from the early 1990s.
Consequently, they became used to alternative ways of sending money internationally, including cryptocurrency precursors such as e-gold. Sannikov added that people in Eastern Europe are generally very tech-savvy, adding to the crypto popularity.