2023 was a year of “recovery” for cryptocurrency, as the industry “rebounded from the scandals, blowups, and price declines of 2022,” according to an extensive update shared by Chainalysis.
With crypto assets rebounding and market activity growing over the course of 2023, many believe that crypto winter “is ending, and a new growth phase may soon be upon us,” the team at Chainalysis noted in their latest report.
But what did all of that mean for crypto crime? That’s what the Chainalysis report has focused on for the most part.
According to the extensive Chainalysis report, 2023 saw a significant “drop in value received by illicit cryptocurrency addresses, to a total of $24.2 billion.”
As always, Chainalysis say that they have “to caveat by saying that these figures are lower bound estimates based on inflows to the illicit addresses they’ve identified today.”
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 they published our Crypto Crime Report last year, they had “estimated $20.6 billion worth of illicit transaction volume for 2022.”
One year later, their updated estimate for 2022 “is $39.6 billion.”
Much of that growth came “from the identification of previously unknown, highly active addresses hosted by sanctioned services, as well as our addition of transaction volume associated with services in sanctioned jurisdictions to our illicit totals.”
The Chainalysis team further noted that through 2021, Bitcoin has “reigned supreme as the cryptocurrency of choice among cybercriminals, likely due to its high liquidity.”
But that’s changed over the last two years, “with stablecoins now accounting for the majority of all illicit transaction volume.”
This change also comes “alongside recent growth in stablecoins’ share of all crypto activity overall, including legitimate activity. However, stablecoin dominance isn’t the case for all forms of cryptocurrency-based crime.”
Some forms of illicit cryptocurrency activity, “such as darknet market sales and ransomware extortion, still take place predominantly in Bitcoin.”
Others, like scamming and transactions associated “with sanctioned entities, have shifted to stablecoins.”
According to Chainalysis, those also happen to be “the biggest forms of crypto crime by transaction volume, thereby driving the larger trend.”
Sanctioned entities, as well as those “operating in sanctioned jurisdictions or involved with terrorism financing, also have a greater incentive to use stablecoins, as they may face more challenges accessing the U.S. dollar through traditional means, but still want to benefit from the stability it provides.”
However, stablecoin issuers can “freeze funds when they become aware of their illicit use, as Tether recently did with addresses linked to terrorism and warfare in Israel and Ukraine.”
According to Chainalysis, perhaps the most obvious trend that emerges “when looking at illicit transaction volume 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 we measured on the year.”
Chainalysis added that most of this total 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.”
For more details, check here.