Privacy coins are contributing to the proliferation of child sexual abuse material (CSAM), as per Chainalysis’s 2024 Crypto Crime Report. The report underscores crypto’s increasing acceptance as legal tender within the dark web CSAM market. While Bitcoin is commonly used for transactions on the dark web, the privacy-focused Monero (XMR) is gaining prominence in illicit transactions.
According to the report, many CSAM vendors are adopting Monero, particularly for money laundering after collecting earnings, rather than for direct purchases. The use of Monero-friendly instant exchangers by CSAM vendors has witnessed a noticeable surge in recent years. These instant exchangers, which facilitate quick crypto-to-crypto trades, obscure transaction details and offer an avenue for vendors to obtain Monero without stringent KYC requirements.
Despite centralized exchanges (CEXes) traditionally being the primary recipients of illicit crypto funds, the ease of using instant exchangers to convert Bitcoin into Monero is narrowing this gap among CSAM vendors. Chainalysis’s report suggests that if the usage of Monero-friendly instant exchangers aligns with actual Monero usage, the data implies that Monero may be extending the longevity of CSAM vendors.
Furthermore, lax KYC (Know Your Customer) requirements associated with privacy coins like Monero enable money laundering, prompting regulatory scrutiny. Recent actions, such as Binance’s decision to delist Monero, reflect regulators’ concerns over privacy coins’ potential for facilitating illicit activities. Government agencies have accused exchanges like Binance of inadequate KYC and AML (Anti-Money Laundering) measures, which facilitate money laundering and criminal behavior.
Despite regulatory challenges, blockchain transparency has aided law enforcement efforts in combating crime. For instance, Chainalysis software was instrumental in shutting down a major CSAM website in 2019 and leading to the arrest of its operator. Law enforcement agencies, equipped with blockchain analysis tools, have successfully apprehended criminals involved in CSAM activities, leading to the rescue of victims.