In a significant development in the cryptocurrency sector, illicit crypto addresses received $24.2 billion in 2023. This figure marks a notable decrease from the previous year’s $39.6 billion, according to a comprehensive report by Chainalysis, a leading blockchain analytics firm. The data suggests a shifting landscape in digital currency-related crime, with stablecoins taking a more prominent role in these transactions.
Illicit crypto trends shift to stablecoins
The report indicates a paradigm shift in the types of assets involved in illicit transactions. While Bitcoin (BTC) was previously the dominant currency in such activities, 2023 saw stablecoins emerging as the primary medium. This transition reflects the growing importance of stablecoins in legitimate cryptocurrency operations. Despite this shift, Bitcoin remains the primary currency for specific illegal activities, such as darknet market sales and ransomware extortion.
Chainalysis’s research indicates that scams and transactions linked to sanctioned entities have increasingly turned to stablecoins since 2022. This trend aligns with the broader adoption of stablecoins in various legitimate crypto activities, highlighting their growing relevance in the digital currency ecosystem.
Sanctioned entities and jurisdictional influence
2023 also saw a significant contribution from sanctioned entities and jurisdictions to the overall volume of illicit crypto transactions. These entities accounted for $14.9 billion, or 61.5%, of the total illicit transaction volume for the year. The report attributes this substantial figure to crypto services facing sanctions from the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) or operating in regions where U.S. sanctions are less enforceable.
A notable example is Garantex, a Russia-based crypto exchange. Despite being sanctioned by OFAC in April 2022, Garantex continues its operations, largely due to the lack of U.S. sanctions enforcement in Russia. Chainalysis highlights that while not all transactions through Garantex are linked to illicit activities like ransomware and money laundering, engagement with the exchange presents a significant sanctions risk for crypto platforms under U.S. or U.K. jurisdiction.
Impact of sanctions on crypto crime
The OFAC’s sanctions on Garantex in 2022 were based on the exchange’s involvement in over $100 million in transactions connected to illicit actors and darknet markets. This included nearly $6 million from the Russian RaaS gang Conti and approximately $2.6 million from the now-defunct Hydra darknet marketplace. These sanctions are part of broader efforts to combat using cryptocurrencies in illegal activities.
The decrease in illicit crypto transactions in 2023, as reported by Chainalysis, indicates a positive trend towards more regulated and monitored use of digital currencies. However, the rise of stablecoins in these activities and the ongoing challenges posed by sanctioned entities underscore the complexities of effectively policing the digital currency space.
The Chainalysis report is a critical resource for understanding the evolving dynamics of cryptocurrency-related crime. It also underscores the importance of ongoing vigilance and regulatory measures in this rapidly evolving sector. As the landscape of digital currencies continues to change, monitoring and analysis by organizations like Chainalysis remain essential in the fight against illicit crypto activities.
