The 2024 Crypto Crime Report shows a significant drop of US$22.7 billion in value by illicit cryptocurrency addresses in 2023.
Blockchain analysis firm Chainalysis has released its 2024 Crypto Crime Report which tracks illicit activities across the Web3 space. The report reveals that there is a decline in illicit activity over the past year which is attributed to a decrease in crypto scams and hacks on decentralised finance (DeFi) platforms.
2023 saw a significant drop in value received by illicit cryptocurrency addresses to a total of US$24.2 billion, which accounted for 0.34% of all total on-chain transactions across all blockchains. This is in comparison to the US$36.9 billion received in 2022, which represents a 34% dip. While the initial figure from Chainalysis’ 2022 Crypto Crime Report only tallied a figure of US$20.6 billion, the higher figure was amended later due to the identification of previously unknown, highly active addresses hosted by sanctioned services, as well as the addition of transaction volume associated with services in sanctioned jurisdictions to the tallied illicit totals.
Moreover, Chainalysis has also added the $8.7 billion in creditor claims against FTX in their 2022 figures. While initially holding off on FTX-related transactions and other firms that collapsed that year, the verdict has since been released on Sam Bankman-Fried’s fraud charges, which led to the addition.
In terms of token popularity for illicit activities, Bitcoin still reigns amongst activities such as darknet market sales and ransomware extortion. But other activities such as scams and transactions associated with sanctioned entities have steadily shifted to stablecoins to enjoy the benefits of the dollar without suffering the consequences of the sanctions.
Crypto scamming and hacking revenue both fell significantly in 2023, with total illicit revenue for each down 29.2% and 54.3%. Scams are now narrowing their focus to target individual victims instead of casting a wide net, resulting in lesser revenue. On the other hand, crypto hacking has become more difficult as industry observers can quickly spot unusual outflows when a hack occurs. The decline in stolen funds is driven by a sharp dropoff in DeFi hacking, and it could represent the reversal of a disturbing trend of DeFi protocols being hacked
Conversely, ransomware crimes are again on the rise after a declining trend in 2022. At the same time, the darknet market is recovering after it took a hit with the shutdown of Hydra, which was previously the world’s most dominant darknet market.
The key emerging trend is the prominence of sanctions-related transactions. Sanctioned entities and jurisdictions together accounted for a combined $14.9 billion worth of transaction volume in 2023, which represents 61.5% of all illicit transaction volume measured. Most of this is driven by cryptocurrency services that were sanctioned by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), or are located in sanctioned jurisdictions, and can continue to operate because they’re in jurisdictions where U.S. sanctions are not enforced.
Some of that $14.9 billion in sanctions-related transaction volume includes activity from average crypto users who happen to reside in those jurisdictions. For example, Russia-based exchange Garantex, which was sanctioned by OFAC and OFSI in the U.K. for its facilitation of money laundering on behalf of ransomware attackers and other cybercriminals, was one of the biggest drivers of transaction volume associated with sanctioned entities in 2023. Garantex continues to operate because Russia does not enforce U.S. sanctions. Exposure to Garantex introduces serious sanctions risk for crypto platforms subject to U.S. or U.K. jurisdiction, which means those platforms must remain ever-more vigilant and screen for exposure to Garantex in order to be compliant.
Read the full report here.
