Illicit cryptocurrency users have discovered new pathways around heightened regulation, with decentralized finance (DeFi) emerging as a favored alternative for darknet market (DNM) vendors.
According to Chainalysis' 2025 Crypto Crime Report, stricter Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations at centralized exchanges (CEXs) have significantly increased operational risks for darknet operators. In response, many illicit actors now use DeFi protocols extensively to obscure the origins and destinations of illegal funds.
Centralized exchanges still dominate as the primary method for laundering illicit funds, yet darknet vendors' growing use of decentralized platforms represents a notable and alarming trend.
The Chainalysis report highlights:
Last year, DNM vendors sent a significantly higher portion of their funds to DeFi than they did historically
This shift is particularly pronounced among wholesale darknet vendors, who process larger volumes of funds. Meanwhile, smaller-scale retail vendors are increasingly opting to hold their illicit earnings in personal wallets, delaying conversion into fiat currency to evade law enforcement detection.
Monero Replaces Bitcoin as the Preferred Darknet Currency
A further complicating factor for regulators and enforcement agencies is the diversification in blockchain platforms utilized for laundering scammed funds. Beyond Bitcoin (BTC), illicit financial flows increasingly move across Ethereum, Tron, and Solana networks, leveraging the extensive DeFi ecosystems present on these blockchains.
Notably, the preference for specific cryptocurrencies is also shifting. Historically, Bitcoin has been the primary currency for illicit online transactions. Yet, due to enhanced blockchain analytics and improved transparency measures that have made Bitcoin transactions easier for law enforcement to trace, many darknet market operators are now embracing Monero (XMR).
Monero’s advanced privacy features—including ring signatures, stealth addresses, and confidential transactions—effectively obscure transaction details, complicating the efforts of authorities attempting to track illicit activities. This enhanced privacy is crucial to darknet vendors, making Monero a preferred crypto asset in the evolving landscape of online crime.
Interestingly, despite the surge in overall crypto crime revenue, darknet markets experienced a decline in 2024. The report documents a noticeable drop, from $2.3 billion in 2023 to $2 billion last year. This decrease may indicate that intensified regulatory efforts and proactive disruption by law enforcement are beginning to impact darknet operations.
However, the shift to DeFi illustrates that illicit actors remain highly adaptive and willing to innovate in response to regulatory pressures. The decentralized nature of DeFi platforms complicates compliance and monitoring efforts, challenging enforcement authorities to continuously evolve their tracking and detection methods.
Ultimately, while regulatory frameworks tighten and centralized exchanges adopt stricter compliance measures, darknet operators remain steps ahead by exploiting the anonymity and decentralization offered by DeFi. The challenge for law enforcement and regulators will be to bridge the gap in technical sophistication, counteracting the constant evolution of criminal methodologies within the rapidly changing crypto landscape.
Dayo Paul
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