Elizabeth Warren is mistaken about the relationship between cryptocurrency and the fentanyl epidemic.

This is an article discussing the role of cryptocurrency in the illegal drug trade. The author notes that while this connection has been previously ignored, recent research from Chainalysis and Elliptic has found that bitcoin and tether are being used in the global fentanyl trade. U.S. Sen. Elizabeth Warren has called for a crackdown on cryptocurrency due to its role in funding the drug trade. However, the article points out that the figures cited by Chainalysis and Elliptic need context, as the size of the fentanyl economy is difficult to judge and the estimate only covers a limited scope. The author suggests that while it is important to address illegal activity, it is also important not to stigmatize the entire cryptocurrency industry. The article concludes with a call to consider the broader context and factors at play when discussing the role of cryptocurrency in the drug trade.

In the past, I have argued that the figure often cited by Chainalysis stating that “less than 1%” of cryptocurrency transactions are connected to crime is likely incomplete. This is because the figure is based on a sample of identified addresses or a probabilistic mapping, which may leave out unidentified alphanumeric public keys from the count. Chainalysis often retroactively increases its reported statistics by mapping more crypto addresses, giving a better sense of how much illicit activity is happening.

As far as I can tell, Chainalysis does not openly disclose what percentage of crypto addresses it can link to known entities. This is understandable, as Chainalysis sells its analytics tech and know-how to governments and corporations that want to know more about the blockchain. Many people in the crypto industry view Chainalysis with contempt because it works against people’s privacy. However, Chainalysis has shown that the idea of on-chain privacy is a joke and that Bitcoin is not a way to transact privately online.

The best thing the crypto industry can do is to be honest about its limits and the use of crypto in online drug markets. Many clearnet drug marketplaces now have an option for paying with crypto, and some even offer discounts on sales made in crypto to encourage its use. However, most transactions like this are not included in analytics firms’ accounting due to KYC and other data surveillance and sharing rules. It is important to be honest about this and not sweep the story under the rug.

It is not suggested that crypto plays a superordinate role in the modern illicit drug industry or that it should be targeted in particular. If it wasn’t crypto being used, it would be a different payment technology. The rise in online drugs markets, online crime, and crypto are all data points in a larger story of greater internet use. Remember that transactions on-chain are permanent, which is why even though crypto is used for crime, it is not recommended to use it to do anything bad.