Eastern Europe leads the world in cryptocurrency adoption—legal and otherwise
New data provided to Fortune by the cryptocurrency research firm Chainalysis finds that Ukraine and Russia rank first and second, respectively, in the adoption of cryptocurrencies like Bitcoin. But while the vast majority of this activity is legitimate, Eastern Europe also leads the world in the illicit use of cryptocurrency on darknet marketplaces and in ransomware schemes.
Ukraine ranked first worldwide on Chainalysis’s Global Crypto Adoption Index, which includes measures of cryptocurrency value received, exchanged, and deposited. Over a 12-month period from July 2019 to June 2020, Ukraine sent $8.2 billion worth of cryptocurrency and received $8 billion worth. Russia ranked second on a population-adjusted basis, sending $16.8 billion and receiving $16.6 billion worth of cryptocurrency.
Overall, Eastern Europe accounted for 12% of global cryptocurrency activity in the period. The study tallied activity in more than a dozen different cryptocurrencies.
According to Roman Sannikov, a Russia specialist with cybersecurity firm Recorded Future, the high volume of legitimate cryptocurrency use in Eastern Europe is a legacy of the Soviet Union and its collapse. For roughly a decade beginning in the early 1990s, he says, former Soviet citizens didn’t have good access to the global banking system. They became used to alternative ways of sending money internationally, including cryptocurrency precursors such as e-gold, even for mundane uses like eBay purchases.
People in Eastern Europe are also generally very tech-savvy, Sannikov says, while the Russian ruble has been unstable in recent years, adding to the popularity of cryptocurrency there.
But not all cryptocurrency users in the region are above-board. Chainalysis found that Eastern Europe was the only part of the world where a darknet marketplace, a hidden website offering illegal goods such as drugs for purchase with cryptocurrency, ranked among the top 10 highest-volume cryptocurrency services. The Russian darknet market Hydra ranked as the sixth-highest volume cryptocurrency service in the region, outranking popular (and legal) cryptocurrency exchanges including Kraken and BitMEX. Chainalysis concludes that Eastern Europe accounts for more overall darknet market-related cryptocurrency activity than any other region.
Eastern Europe also leads the world in ransomware payments. In ransomware schemes, hackers lock victims’ files or computers and demand payment—usually in cryptocurrency—to unlock them. Chainalysis found that 23% of all funds sent from ransomware addresses were funneled to Eastern Europe, indicating that the region is the home to the world’s highest-earning ransomware operations.
Criminal applications, however, made up less than 2% of the activity Chainalysis tracked in Eastern Europe.