There’s been a sharp decline in the reception of cryptocurrencies by illicit addresses in 2023, according to blockchain intelligence firm Chainalysis. In its newly released 2024 Crypto Crime report, roughly $24 billion worth of crypto was received by illicit addresses last year, accounting for 0.34% of all transaction volume.

That’s down nearly 40% from 2022’s figure. For the second consecutive year, stablecoins accounted for the majority of illicit transaction volume in 2023. Prior to 2022, bitcoin had consistently represented most of the transaction volume each year since 2018. But in 2022, stablecoins suddenly accounted for roughly two-thirds of the illicit traffic volume, and this trend continued in 2023. Crypto scamming and hacking revenue both fell significantly in 2023.

Total illicit revenue for these activities was down by 29.2% and 54.3%, respectively.  There is an important caveat attached to this. According to Chainalysis: “One year from now, these totals will almost certainly be higher, as we identify more illicit addresses and incorporate their historic activity into our estimates. For instance, when we published our Crypto Crime Report last year, we estimated $20.6 billion worth of illicit transaction volume for 2022.

One year later, our updated estimate for 2022 is $39.6 billion.” The Impact of FTX The 2023 report had not reported transactions associated with FTX and other firms accused of fraud until the legal processes around them had reached a decision. Now that FTX CEO Sam Bankman-Fried has been convicted of fraud, Chainalysis is retroactively including the $8.7 billion in creditor claims against FTX in its 2022 figures. Chainalysis’ totals also include funds stolen in crypto hacks, but exclude revenue from non-crypto native crime. So when crypto is used to pay for things like drug trafficking, that is not included in the data. One area where the report says fraudulent activity is trending down is romance scams.

“Our on-chain metrics suggest scamming revenues globally have been trending down since 2021,” the report says. “We believe this aligns with the long-standing trend that scamming is most successful when markets are up, exuberance is high, and people feel like they are missing out on an opportunity to get rich quickly.” As Brittany Allen of Sift, a leader in digital trust and safety issues, has pointed out, the transparency of blockchain makes it difficult for fraudsters to get away with their crimes for any great length of time. “All it takes is one mistake to reveal their real identity, at which point that mistake is part of the public, permanent blockchain record,” Allen has written.

“However, the real challenge for exchanges doesn’t lie in catching these cybercriminals post-attack, but in preventing them from happening in the first place.”

By Tom Nawrocki
Jan 22, 2024 00:00
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