Everything can be used for illegal transactions. Probably USD in the form of cash is still the most used tool for illegal activities. I guess EUR is the second.
probably? nothing in the world can come even close to what damage has been done with the us dollar. bitcoin in the coming 10 years won't come even close to 1% of that. and still the media is blaming bitcoin for terrorists attacking airports and so on. it's not bitcoin that's being used for that. look at cash money, gold, artwork, and the list goes on. everything with value from money to a car can be used to finance terrorists.
It is true that fiat currency and gold are the major transaction for Illegal activiy but as bitcoin is going in fame and politicians and big country particularly USD is getting afraid that Bitcoin can take over the fiat currenc so they are all framing it Bitcoin as illegal activity major source so that they can kill bitcoin. But they dont know that bitcoin is now 50% above in major form and within some year we can see a major breakthrough in bitcoin world.