The value of illicit cryptocurrency transactions declined in the past year, as the digital assets industry showed more signs of maturing, a study found.
The value received by questionable wallets fell more than 48 percent to $24.2 billion in 2023, from an all-time high of $39.6 billion the previous year, the New York-based blockchain platform said in its report. Cryptocrime trends for 2024 a report.
The share of cryptocurrency transaction volume associated with illicit activity also fell to 0.34 percent last year from 0.42 percent in 2022, the report showed.
“With Bitcoin just crossing the $46,000 mark, on the back of the SEC’s recent historic decision to approve exchange-traded funds, there are strong signs that the crypto winter is beginning to thaw,” said Eric Jardine, Cybercrime Research. Lead in Chainalysis.
“Combined with the significant decline in cryptocurrency crime activities in the past year, it appears that a new growth phase may soon be upon us.”
In a major victory for the cryptocurrency sector – the Securities and Exchange Commission (SEC) recently approved the first bitcoin spot funds in the United States.
Bitcoin rose 157 percent last year on optimism over the eventual launch on January 11 of the first U.S. ETF to directly hold the token.
Digital assets also got a boost from bets on more flexible monetary policy.
Nine new bitcoin ETFs were launched last week, including those backed by BlackRock and Fidelity Investments.
But bitcoin fell to its lowest price since mid-December on Friday as speculative demand for the currency dissipated due to hype around new ETFs.
The largest digital asset fell below $40,000 on Friday and was trading at $41,636 as of 11 a.m. Saturday.
About 61.5 percent of illicit cryptocurrency volumes in 2023 came from activities linked to sanctioned entities, Chainalysis said.
She added that the sanctioned entities and jurisdictions collectively accounted for $14.9 billion in transaction volume last year.
The report showed that cryptocurrency crimes accounted for only 0.34 percent of the total cross-chain transaction volume last year.
Chainalysis said the notable decline in the volume of illicit transactions was largely attributable to the sharp decline in cryptocurrency scams and stolen funds, with total illicit revenues declining by 29.2 percent and 54.3 percent, respectively.
Many cryptocurrency scammers have now adopted “romance scam tactics,” where they target individuals and build relationships with them in order to pitch them fraudulent investment opportunities, rather than advertise them widely, often making them more difficult to detect, according to the report. .
“The decline in stolen funds was largely driven by the sharp decline in decentralized finance hacking,” it said.
“This decline may represent a reflection of a worrying long-term trend, and could be a signal that DeFi protocols are improving their security practices.”
However, the ransomware and dark web markets — two of the most prominent forms of cryptocurrency crime — saw an increase in revenue last year, according to Chainalogy.
“Ransomware revenue growth is disappointing following the sharp declines we saw last year, and suggests that ransomware attackers may have adapted to enterprise cybersecurity improvements,” Mr. Jardine said.
The report also identified the ongoing shift away from Bitcoin as the cryptocurrency of choice among cybercriminals.
This shift away from Bitcoin is an interesting development and once again indicates the maturity of this sector
Eric Jardine, Cybercrime Research Lead at Chainalogy
During 2021, Bitcoin dominated its position as the cryptocurrency of choice among cybercriminals, likely due to its high liquidity.
While some forms of illicit cryptocurrency activity, such as darknet market sales and ransomware extortion, still occur mostly in bitcoin, other forms, such as fraud and transactions associated with sanctioned entities, have shifted to stablecoins, Chainalysis said.
Overall, Bitcoin was used in just under 25 percent of all illicit transactions, which lags far behind stablecoins, which now account for the majority of illicit activity, in line with the growth of stablecoins overall, the company added.
“This shift away from Bitcoin is an interesting development and once again demonstrates the maturity of the sector,” Jardine said.
Updated: January 20, 2024 at 8:12 am