## THE TRUTH ABOUT THE DARK WEB

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**Canonical URL:** [THE TRUTH ABOUT THE DARK WEB](https://www.imf.org/-/media/files/publications/fandd/article/2019/september/the-truth-about-the-dark-web-kumar.pdf)

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### Background and technology
- Tor (short for “The Onion Router”) is an anonymized and encrypted network built on many layers of encryption that underpins the dark web.
- The dark web consists of hidden sites inaccessible via a regular browser and not indexed by search engines.
- The Tor browser is a free download that enables access to this hidden corner of the web.
- Original Tor development began in the late 1990s with US Department of Defense research efforts; some researchers launched a nonprofit focused on anonymity for human rights and privacy activists.

### Legitimate uses and gray areas
- Over 65,000 unique URLs ending with .onion exist on the Tor network.
- A 2018 study by Hyperion Gray catalogued about 10 percent of these sites and found the most prevalent functions were:
  - forums, chat rooms, and file and image hosts
  - commerce via marketplaces
- A 2016 study by Terbium Labs analyzing 400 randomly selected .onion sites suggests that over half of all domains on the dark web are legal.
- Legitimate and protective use cases:
  - Access to information and protection for individuals under oppressive regimes that block parts of the internet or punish political dissent.
  - Whistle-blowing and secure communication tools in freer societies.
  - Privacy and anonymity for individuals concerned about corporate or government tracking.
- Many mainstream organizations maintain hidden Tor sites (examples cited include major newspapers, Facebook, and the US Central Intelligence Agency) to facilitate secure communication and signal a commitment to privacy.

### Illicit activities and market composition
- The same privacy and anonymity that protect dissidents also enable illicit activity, including:
  - arms trafficking
  - drug dealing
  - sharing of exploitative content, including child pornography and images of violence and abuse
  - websites supporting extremist rhetoric (neo-Nazis, white supremacists)
- Of close to 200 domains catalogued as illegal by Terbium Labs, more than 75 percent appear to be marketplaces.
- Popular illicit product categories:
  - Recreational and pharmaceutical drugs
  - Stolen and counterfeit documents (identities, credit cards, bank credentials)
  - Hacking and technological crime services (malware, distributed denial of service attacks, hacking for hire)
  - Pornography and counterfeit goods
- Cryptocurrencies such as Bitcoin and Monero have been primary means of payment on these marketplaces.

### Quantitative indicators and scale
- Chainalysis reported Bitcoin transactions on the dark web grew from approximately $250 million in 2012 to $872 million in 2018.
- Chainalysis projected that Bitcoin transactions on the dark web will reach more than $1 billion in 2019.
- Chainalysis also noted that the proportion of Bitcoin transactions tied to illicit deals has declined by 6 percent since 2012 and now accounts for less than 1 percent of all Bitcoin activity.
- United Nations estimates of money laundering globally in one year are 2 to 5 percent of global GDP—between $1.6 trillion and $4 trillion.
- Case study figures for Silk Road (Silk Road 2.0):
  - Operated for two and a half years.
  - Used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to well over 100,000 buyers.
  - Used to launder hundreds of millions of dollars from unlawful transactions.
  - Generated sales totaling more than 9.5 million in Bitcoin valued, at the time, at approximately $1.2 billion.
- AlphaBay and Hansa market were shut down in 2017.

### Enforcement progress and cooperation
- International information sharing and coordinated law enforcement operations have improved:
  - During 2018–19, Interpol and the European Union brought together law enforcement agencies from 19 countries to identify 247 high-value targets and shared operational intelligence.
  - These efforts allowed members of the group to make arrests and shut down 50 illicit dark-web sites, including Wall Street Market and Valhalla.
- Domestic law enforcement capability examples:
  - The US Federal Bureau of Investigation (FBI) reportedly conducted operations to “de-anonymize” Tor servers by establishing nodes that reveal identities and locations of some illegal Tor-based webpages.
  - Dutch operation that hijacked a leading dark web merchant, ran it anonymously for a month, and used the collected information to disrupt dozens of other merchants.

### Regulatory responses and policy needs
- Governments and international institutions are seeking to regulate cryptocurrencies that fuel dark web marketplaces:
  - In June 2019, the Financial Action Task Force issued guidance urging companies processing cryptocurrency transfers to identify both the sender and receiver of fund transfers.
  - The guidance follows the recommendation of the 2018 G20 Summit, where leaders asked international regulatory agencies to consider policy responses for crypto assets, particularly related to know your customer, anti–money laundering, and countering the financing of terrorism.
- Challenges:
  - The start-up ecosystem of exchanges, wallets, and other crypto payment facilitators lacks the infrastructure to adopt “financial-sector-like” standards.
  - Supervisors need to lay the groundwork for enhanced scrutiny before broad adoption.
  - The impending launch of Libra (Facebook’s cryptocurrency) will increase urgency by lowering barriers to adopting virtual assets for Facebook’s nearly 2 billion-plus users.

### Policy trade-offs and recommended approach
- Core policy tension:
  - Protecting dissidents, privacy advocates, and whistle-blowers versus preventing child abuse, arms trafficking, and drug distribution.
- Recommended approach:
  - Devise nuanced practices that protect free expression and privacy while identifying and eradicating the most insidious illegal activities on the dark web.
  - Continue to improve international cooperation, information sharing, and law enforcement technical capabilities.
  - Regulate cryptocurrency transfer processes to require identification of senders and receivers, and prepare supervisors and the crypto ecosystem for enhanced scrutiny.

*Content based on "THE TRUTH ABOUT THE DARK WEB" by Aditi Kumar and Eric Rosenbach, Finance & Development, September 2019.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2019/september/the-truth-about-the-dark-web-kumar.pdf_