A crypto crime report by Chainalysis due to be released in full later this month shows that the number of crimes involving crypto has fallen since 2018. At the same time, Bitcoin’s role has fallen by 67% as the share of transactions made with stablecoins dramatically increased.
After a steady yearly rise, a significant drop occurred from 2022 to 2023, as the value received by illicit addresses fell from $39.6 billion to $24.2 billion, constituting just 0.34% of the overall on-chain transaction volume.
Figures are lower bound estimates based on inflows to the illicit addresses identified, Chainalysis says.
“Aclose examination of current trends reveals a changing landscape within the cryptocurrency realm regarding Bitcoin’s role in facilitating illicit activities.”
Edith Reads, Financial Analyst, Stocklytics
The 2022 total figure includes the $8.7 billion in creditor claims against FTX. These claims disappeared in 2023, but the volume of transactions to sanctioned entities and jurisdictions remained consistent. These accounted for $14.9 billion worth of transaction volume in 2023, 61.5% of all illicit transaction volume measured that year.
Most of this total is driven by cryptocurrency services that were sanctioned by the Office of Foreign Assets Control (OFAC).
“Historically, Bitcoin earned a reputation for facilitating illicit transactions, including money laundering, ransom payments, and purchasing goods and services on the dark web. Its unique characteristics, being pseudo-anonymous and decentralized, appealed to those desiring transactions beyond the control of institutions,” Edith Reads, Financial Analyst, Stocklytics, said. “However, a close examination of current trends reveals a changing landscape within the cryptocurrency realm regarding Bitcoin’s role in facilitating illicit activities.”
Bitcoin’s involvement in illegal crypto activity was 25% in 2023, down from 75% in 2020. In the same time stablecoin use went from around 12% to over 60%.
Over time, Bitcoin has undergone changes that have played a role in decreasing its association with criminal actions. In collaboration with developers, the community of cryptocurrency enthusiasts has dedicated efforts to enhance the visibility and traceability of bitcoin transactions.
Bucking the downwards trend, ransomware and darknet markets were two of the most prominent forms of crypto crime that saw revenues rise in 2023. This comes after a 2022 decline, driven largely by the shutdown of Hydra, which was once the world’s most dominant market by far, capturing over 90% of all darknet market revenue at its peak.
