Crypto crime in 2023 exceeded $24 billion: Chainalysis

The analytics firm found that illicit transactions are carried out more with stablecoins than any other cryptocurrency.

Crypto crime in 2023 exceeded $24 billion: Chainalysis
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Illicit cryptocurrency activities globally in 2023 totaled $24.2 billion, according to the blockchain analytics firm Chainalysis. That figure is over $15 billion lower than the $39.6 billion reported in the previous year.

The firm said illegal transactions constituted only 0.34% of the total on-chain transaction volume for the year.

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Caveat emptor

  • Chainalysis cautions that the $24 billion only represents a lower band estimate of the illicit volumes in 2023, adding that “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.”
  • Case in point: The initial estimates for 2022 crypto crime volumes were $20.9 billion, which has now been updated to $39.6 billion.

Dive in

  • Chainalysis categorizes illicit transactions into two types: those sent to addresses linked to known illegal activities and those stolen through cryptocurrency hacks.
  • On-chain crypto criminal activity for 2023 was valued at $24.2 billion, down from $39.6 billion in 2022.
  • For the second year running, stablecoins accounted for most of all criminal transactions, a phenomenon the blockchain analytics firm says is in tandem with the recent increase in stablecoin share of all crypto activity.
  • However, criminal activities such as the purchase of child abuse materials, darknet materials and ransomware extortion were done almost exclusively with bitcoin.
  • On the other hand, crypto scams and transactions associated with sanctioned entities, including terrorist organizations, saw more stablecoin activity and transaction volume.

Of note: Chainalysis believes that entities involved in these crimes have more incentives to use stablecoins as they can circumvent the bottlenecks around getting United States dollars.

Driving the news

  • Revenue from crypto scams fell by 29.2%, while funds lost to hacks reduced even more, clocking at 54.3% less than in 2022.
  • According to Chainalysis estimates, the drop in crypto scams is commensurate with a long-standing trend that these fraudulent schemes are most successful in a bull market when the fear of missing out is rife.
  • Instead of these entities loudly seeking funds for deceitful investments, 2023 saw more pig-butchering scams — romance fraud where the perpetrators target and build relationships with individuals over time to defraud them.
  • It added that crypto hacks dropped because deFi hacks dropped, possibly signifying that deFi protocols now have improved security practices.

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Which crypto crimes are growing?

  • The report found that following encouraging declines in 2022, ransomware and darknet markets saw a resurgence in 2023.
Be smart: Ransomware is a type of malware where an attacker hacks and encrypts a victim’s data, files, or devices until a ransom is paid to the perpetrator.

darknet market, on the other hand, is a market domiciled on the dark web. It typically trades illegal goods and often receives cryptocurrencies as payment.
  • While volumes for these two illicit activities pale compared to other crypto crimes, Chainalysis believes the increases recorded for each call for concern.
  • Per the report, transactions involving sanctioned entities were valued at $14.9 billion, accounting for 61.5% of all illicit transaction volume analyzed by the firm.

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