2023 Crypto Crime: Reduced Scales, Growing Threats
2023 has been a landmark year for the virtual asset market, bouncing back from previous scandals and price crashes. Let’s explore the latest Chainalysis report for an in-depth analysis of the evolving trends in crypto crime.
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The research by American analytics firm Chainalysis sheds light on notable structural shifts in the clandestine world of crypto-economics and associated cybercrime.
Scale Downturn
Chainalysis's data for 2023 reveals that wallet addresses linked to illicit activities received a total of $24.2 billion. This figure marks a considerable decline from 2022's $39.6 billion but remains higher than the 2021 total when cryptocurrencies similarly experienced a boom.
This downturn is likely a result of crypto exchanges and services beefing up their security and identification protocols, making it harder for criminals to exploit cryptocurrencies.
It's important to note that these figures are preliminary, with numerous wallets under suspicion for money laundering still pending inclusion after further verification.
Additionally, the total illicit crypto turnover for 2022 was inflated by $8.7 billion in creditor claims against FTX, painting a less-than-optimistic picture of the actual reduction in these illicit flows.
Illegal Activity Funds Volume. Source: Chainalysis
Chainalysis has observed an interesting trend change in the types of assets that criminals commonly use for laundering illicit gains. In 2020, about three-quarters of such transactions were made in BTC, but by 2023, this proportion dropped to less than 25%. Currently, over half of these illicit transactions are conducted using stablecoins.
Distribution of Illicit Transactions by Asset Types. Source: Chainalysis
This shift is also supported by findings from the U.S. Financial Crimes Enforcement Network (FinCEN), which reports that nearly half of all over-the-counter USDT transactions are linked to money laundering or grey market dealings.
The Rise of New Threats
While the overall volume of criminal activities has decreased, 2023 has seen an escalation in certain specific types of cryptocurrency-related crimes.
One of the most prevalent is ransomware attacks. In 2023, perpetrators using ransomware extorted $1.5 billion, marking a 24% increase from the previous year. These malware attacks have grown popular not only among organized crime groups involved in drug and arms trafficking but also among regular darknet users. Furthermore, there has been a surge in personalized attacks aimed at specific individuals or companies, known as “social engineering attacks”. These operations are intricate and require skilled hackers, but they can be highly lucrative.
Another significant area of crypto crime involves transactions linked to sanctioned entities. In 2023, the volume of such transactions grew by 61.5%, reaching $14.9 billion. Numerous cryptocurrency services, despite being on sanctions lists, continue to operate and are used by both US and European citizens as well as international groups engaged in illegal arms trafficking and human trafficking.
It's important to note that Chainalysis's data does not include transactions involving privacy cryptocurrencies, which are more complex to analyze. Therefore, the true scale of the shadow flows in the crypto economy is likely even greater than reported.
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