Cryptocurrency research firm Chainalysis has found that Eastern Europe is is one of the leaders in crypto adoption, with Ukraine and Russia ranking first and second on its Global Crypto Adoption Index, the firm said in a blog post.
Coming as part of Chainalysis’ “2020 Geography of Cryptocurrency Report”, the blog post notes that while Eastern Europe has one of the highest crypto adoption rates in the world, it also leads the world in the use of crypto for illicit activities. The report showed that out of the $41 billion in total transaction volume, 1.4% was sent to illicit entities, which is the second-highest rate in the world, after Latin America.
Eastern Europe also accounted for 12% of the global cryptocurrency activity over a 12-month period from July 2019 to June 2020. During this period, Ukraine sent $8.2 billion worth of cryptocurrency and received $8 billion worth, which ranked it first on a population-adjusted basis on Chainalysis’ Global Crypto Adoption Index. Russia on the other hand, ranked second with $16.8 billion sent and $16.6 billion received.
The high crypto adoption rate in the region could be the result of the Soviet Union and its collapse, Roman Sannikov, a specialist from cybersecurity firm Recorded Future, noted. According to him, the banking industry in the Eastern Block “did not develop the same way it did in the West”, and due to the lack of good access to the global banking system, the former Soviet citizens had to turn to alternative ways of sending money.
He explained further:
“As a result, a lot of homegrown and unofficial methods were created to move funds. Even before the use of cryptocurrencies, there were other financial instruments such as vouchers and hawala type exchanges. Many of these had very limited know your customer standards, if any, and allowed for rampant money laundering, and capital flight.”
Following the Cold War, the payment systems that were developed allowed for significant financial crime, which could be the reason behind the high use of cryptocurrency for illicit activities. In fact, Eastern Europe is the world leader in ransomware, with more than 23% of funds received from ransomware addresses being linked to the region.
One of the world’s largest darknet marketplaces by cryptocurrency volume, Hydra Marketplace, calls Eastern Europe its home. With over $1.2 billion worth of crypto in revenue between June 2019 and July 2020, Hydra is the sixth-largest cryptocurrency service in the region by volume. It offers its customers illicit services, such as buying drugs or fake IDs using crypto.