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Revenues From Crypto Crimes Fall 65% as Projects Harden Security With AI

3 mins
Updated by Geraint Price
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In Brief

  • Chainalysis reports a 65% decrease in illicit crypto flows and a $3.3 billion drop in proceeds from scams year-to-date
  • Ransomware revenues grew to $449.1 million year-to-date and could reach $939 million by the end of 2023.
  • The decrease in crypto scams could be attributed to the maturation of cybersecurity services in decentralized finance.
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Blockchain security firm Chainalysis has confirmed a decrease in crypto scams and a 65% decline in illicit flows to criminal entities year-to-date compared to 2022.

The movement of funds into high-risk locations such as mixers and risky exchanges also fell by 42%. 

While the trend follows a broader decline in crypto transactions, volumes of legitimate transactions have fallen only 28% this year. Regulatory actions in the US, as well as lower market liquidity, have hurt global trading. In the last quarter, the exit of big market makers pulled $10 million worth of liquidity from Bitcoin markets.

The Chainalysis crime report also confirmed a $3.3 billion decline in illicit flows from crypto scams compared to a year ago. The drop bucks the increases in scam revenue that normally accompany rising crypto prices. Bitcoin (BTC) is up 80% this year, with the possibility of more upside from the expected approval of several Bitcoin spot exchange-traded funds.

The decline in crime may be due to the maturing of cybersecurity services focusing on decentralized finance. Anchain.ai and Cyver.ai are using sophisticated artificial intelligence to close on-chain avenues attackers previously visited.

Additionally, the rise of tokenization and a growing need for digital asset custody has placed growing emphasis on the methods custodians use to protect assets. The hardening of cybersecurity will only increase as more traditional institutions demand secure custody of digital assets.

Illegal Flow of Funds to Impersonation Scams Rose 49%

VidiLook and Chia Tai Tianqing Pharmaceutical Management, two of the largest scam addresses, appear to have ceased activity. The former stole $120 million in crypto in a few months, Chainalysis said, necessitating continued awareness from law enforcement and market users.

Moreover, Chainalysis identified a worrying rise in the movement of illegal funds to impersonation scams. Criminals extort money by posing as famous or wealthy figures. While the overall revenue declined 23% this year, the money flowing to scammers increased 49% annually.

Despite lower levels of crypto crime and a 65% decline in illicit flows in 2023, Chainalysis found the movement of illegal funds to impersonation scams rose 49%.
Illegal movement of funds into impersonation scams grew 49% | Source: Chainalysis

Ransomware takings also bucked the overall drop in crime, growing to $449.1 million year-to-date. If ransomware crime continues to rise, the total stolen by the end of 2023 will reach $939 million.

Ransomware criminals demand funds to restore access to important data. While many companies refuse to pay the funds to release their data, criminals may be trying to squeeze the most funds out of the remaining victims.

Learn here how to avoid becoming a victim of a cryptocurrency scam.

On Monday, blockchain intelligence firm Arkham launched a marketplace trading information on blockchain fund flows. An on-chain sleuth can accept the offer to trace fund flows, with the requester having exclusive access to the data for 90 days after it is found.

Got something to say about the Chainalysis crime report in 2023 or anything else? Write to us or join the discussion on our Telegram channel. You can also catch us on TikTokFacebook, or Twitter.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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