2023 Shows a Shift in Crypto Crime Trends, Chainalysis Reports

In 2023, illicit cryptocurrency transactions fell to $24.2 billion, marking a significant decrease from $39.6 billion in 2022. This data, revealed in a new report by blockchain analytics firm Chainalysis, indicates a changing trend in the volume and nature of illegal crypto activities.

Shift in Crypto Crime Landscape

The year saw a notable shift in the types of cryptocurrencies used for illicit transactions. While Bitcoin (BTC) used to be the main currency for such activities, Chainalysis reports that stablecoins have now taken the lead. This change mirrors the growing use of stablecoins in legitimate crypto transactions.

Despite the overall shift to stablecoins, Bitcoin continues to be the primary currency in certain illegal activities like darknet market sales and ransomware. However, scams and transactions linked to sanctioned entities have increasingly moved to stablecoins since 2022.

A substantial portion of the illicit transaction volume in 2023, amounting to $14.9 billion (61.5% of the total), was attributed to sanctioned entities and jurisdictions. These figures were largely influenced by crypto services facing sanctions from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) or operating in regions where these sanctions are not enforced.

Chainalysis’s report highlights a significant reduction in stolen cryptocurrency in 2023, with illicit revenue overall decreasing by more than 54%. The total illicit transactions, including those to identified illicit addresses and funds stolen in hacks, accounted for 0.34% of all on-chain transactions.

Impact of FTX and Legal Proceedings

The high illicit transaction volume in 2022 included $8.7 billion from FTX creditor claims. The inclusion of these figures in the total was pending legal outcomes. Following the conviction of FTX founder Sam Bankman-Fried, Chainalysis included FTX in the 2023 totals.

2023 also witnessed significant cryptocurrency-related crimes, including a hack on the Optimism Network and substantial losses in Canada due to crypto scams. U.S. authorities charged three individuals with laundering over $10 million in cryptocurrency, and Chainalysis reported Tether freezing funds linked to human trafficking.

While Bitcoin remains the leading cryptocurrency, it is no longer the top choice among scammers, who now prefer stablecoins. This shift reflects stablecoins’ dominance in illicit transactions, although this is not uniform across all types of crypto crimes.

Despite the overall decrease in stolen cryptocurrency, Chainalysis observed significant revenue increases in ransomware and darknet market activities compared to the previous year.