Over $24 Billion in Cryptocurrency Received by Illicit Addresses in 2023, Down 40% from 2022: Chainalysis

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Crypto research firm Chainalysis revealed that at least $24.2 billion worth of cryptocurrency was sent to illicit wallet addresses in 2023, encompassing addresses associated with sanctions, terrorist financing, and scams. The figure is considered a conservative estimate, and Chainalysis expects it to rise as more illicit addresses are identified.

Chainalysis focused on crypto-related crime, acknowledging the challenge of distinguishing proceeds from non-crypto-related criminal activities in blockchain data alone. The data included crypto sent to identified illicit addresses and funds stolen in crypto hacks.

Sanctioned entities and jurisdictions accounted for $14.9 billion of the total illicit transaction volume in 2023, making up 61.5% of the measured illicit transaction volume for the year.

Reportedly, in 2022, the estimated illicit transaction volume was $39.6 billion, showcasing the growth in identified addresses and the impact of sanctioned services on totals. Overall, the share of all crypto transaction volume associated with illicit activity decreased from 0.42% in 2022 to 0.34% in 2023.

While Bitcoin was the dominant choice among cybercriminals in 2021, stablecoins now account for the majority of illicit transaction volume. This shift aligns with the overall growth of stablecoins in both legitimate and illicit activities. However, certain forms of cryptocrime, such as darknet market sales and ransomware extortion, still predominantly involve Bitcoin.

Crypto scamming and hacking revenues declined significantly in 2023, with illicit revenue down by 29.2% and 54.3%, respectively. Scamming has evolved, with scammers adopting romance scam tactics to build relationships with individuals for fraudulent investment pitches.

The Chainalysis report indicated a decline in hacking revenue, which is attributed to a significant reduction in DeFi hacking incidents, possibly indicative of improved security practices. Various other types of illicit addresses were identified in the report, including those linked to terrorist financing, cybercrime, and child abuse material.

Illicit activity is prominently driven by transactions involving sanctioned entities and jurisdictions, accounting for 61.5% of the measured illicit transaction volume. Cryptocurrency services sanctioned by regulatory bodies contribute significantly to this total, introducing compliance challenges for platforms exposed to such entities.

The report further stated that transactions with sanctioned entities and jurisdictions accounted for $14.9 billion, representing 61.5% of all illicit transaction volume in 2023. Sanctions-related activities involve cryptocurrency services located in jurisdictions where U.S. sanctions are not enforced, posing challenges for crypto platforms subject to U.S. or U.K. jurisdiction.

The UN Report Highlights the Use of USDT on the Tron Blockchain in Money Laundering in Southeast Asia

On January 16, the Southeast Asia and Pacific division of the UN Office for Drugs and Crime published a report focusing on the involvement of cryptocurrencies in illicit activities and underground banking.

The report identified the USDT stablecoin, particularly on the Tron blockchain, as a key tool for money laundering in the region, citing its stability, transaction anonymity, and low fees.

However, the U.S. has said it will crack down on crypto firms that fail to block and report illicit money flows. Last year, the founder of crypto exchange Binance pleaded guilty to breaking U.S. anti-money laundering laws.

A United Nations report on Monday said that unregulated cryptocurrency exchanges have become “foundational pieces” of the financial architecture used by organized crime in Southeast Asia.

On January 4, blockchain security firm CertiK reported that crypto hack revenue declined by over 51% in 2023. This marked a “positive development” in blockchain security, according to CertiK co-founder Ronghui Gu.

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