Crypto Crime Down But Not Out: Chainalysis Highlights Shifting Trends in 2023

Crypto-related crime fell in 2023 as digital assets remained largely sideways and mostly in bear market territory. Scamming and stolen funds fell, but there was an increase in ransomware, according to blockchain analytics provider Chainalysis.

The firm reported the declines in illicit activity in its 2024 Crypto Crime Trends, released in part on January 18.

Crypto Crime Falls

The firm reported that 2023 saw a significant drop in value received by illicit cryptocurrency addresses to a total of $24.2 billion. This is down 39% from 2022, which saw $39.6 billion in illicit transaction volume. 

Moreover, illicit activity accounted for 0.34% of all crypto transaction volume in 2023, down 20% from 0.42% in 2022. The report is largely good news for the crypto industry but won’t please those US politicians with anti-crypto agendas who regularly spout misinformation about crypto crime.

Additionally, stablecoins now make up the majority of illicit crypto transaction volume, though some crimes like ransomware still predominantly use Bitcoin. A recent UN report revealed that Tether played a significant role in Southeast Asia’s crypto crime wave.

Chainalysis said there was a caveat that these figures were “lower-bound estimates” based on inflows to the illicit addresses it has already identified.

“One year from now, these totals will almost certainly be higher, as we identify more illicit addresses and incorporate their historic activity into our estimates.”

Read more: 8 Best On-Chain Analysis Tools in 2023

Crypto scamming and hacking revenues declined significantly in 2023, by 29.2% and 54.3% respectively. This aligns with lower crypto prices and market lethargy for most of the year when assets were consolidating.

The decline in stolen funds is driven largely by a sharp dropoff in DeFi hacking, it stated. Moreover, this dropoff could represent the “reversal of a disturbing, long-term trend, and may signify that DeFi protocols are improving their security practices.”

Ransomware Revenues Up 

However, ransomware and darknet market crypto revenues grew in 2023, suggesting criminals have adapted to cybersecurity improvements.

It also noted that many crypto scammers have now adopted romance scam tactics, otherwise known as “pig butchering.” This targeting of individuals makes the scams more difficult to uncover, it noted.

Sanctions-related transactions accounted for $14.9 billion, or 61.5% of all illicit crypto volume in 2023. This is driven by services in sanctioned jurisdictions continuing to operate, it noted. 

Countries such as Russia, which do not enforce US sanctions, still have exchanges linked to money laundering in operation. These account for the majority of the illicit crypto volume for this category reported Chainalysis. 

Nevertheless, law enforcement agencies globally are ramping up efforts to tackle crypto crimes, according to a recent report.