Major Decline in Crypto Crime With Predictions of a Promising Growth Phase in 2024, Report Shows

Crypto crimes and scams are like common issues found in any industry. However, it looks like this year has been a lucky one for the crypto community.

In the preview of Chainalysis‘ new 2024 Crypto Crime Report, the blockchain data platform delves into the world of crypto-related crime, revealing a remarkable drop in the value received by illicit cryptocurrency addresses throughout 2023.

The total sum amounted to US$24.2 billion, a significant decrease from the all-time high of US$39.6 billion in 2022.

A closer look at the data reveals that the largest portion, representing 61.5% of the illicit transaction volume, pertains to sanctioned entities, amounting to US$14.9 billion. This sheds light on the intersection between crypto activities and geopolitical measures.

Maturing Crypto Landscape

Despite concerns over illicit activities, the report underscores the growing maturity of the crypto sector. In fact, crypto crime accounted for just 0.34% of the total on-chain transaction volume in 2023, showcasing a small fraction in the broader landscape of legitimate transactions.

“Thanks to the inherent transparency of blockchains, analytics tools from companies such as Chainalysis can provide regulators, law enforcement agencies and crypto businesses with the ability to detect and react to malicious activity on the blockchain. This will undoubtedly aid in the rapid maturing of the segment and bolstering of consumer confidence,” commented Eric Jardine, Cybercrime Research Lead at Chainalysis.

Decline in Scams and Stolen Funds

The drop in illicit transaction volume can also be attributed to a significant decline in crypto scamming and stolen funds, down 29.2% and 54.3%, respectively, which signals progress in securing the crypto space against fraudulent activities.

DeFi Hacking Decline

Notably, the decline in stolen funds is due to a sharp drop-off in DeFi (Decentralized Finance) hacking.

This drop-off could represent the reversal of a disturbing, long-term trend, and could
be a signal that DeFi protocols are improving their security practices. This is welcome news for the
crypto community in the UAE, which was one of the only countries in the region where a higher share
of crypto activity takes place on decentralized exchanges (48%), rather than on centralized
exchanges (46%).

Ransomware and Darknet Markets on the Rise

In contrast to overall trends, ransomware and darknet markets saw increased revenues in 2023. This rise raises concerns about the adaptability of ransomware attackers to cybersecurity improvements and the resilience of darknet markets despite shutdowns.

“The growth of ransomware revenue is disappointing following the sharp declines we saw last year, and suggests that perhaps ransomware attackers have adjusted to organisations’ cybersecurity improvements,” said Eric. “It also seems like the Hydra shutdown has done little to deter darknet markets as illicit activity on these channels is on the rebound, with total revenue climbing back towards its 2021 highs.”

Bitcoin’s Changing Role

Moreover, the report highlights a shift away from Bitcoin as the cryptocurrency of choice for cybercriminals. While Bitcoin is still prevalent in certain illicit activities, stablecoins have become the majority in transactions associated with scams and sanctioned entities.

Overall, Bitcoin was utilized in just under 25% of all illicit transactions, far behind
stablecoins, which now account for the majority of illicit activity, in line with the growth of stablecoins
overall.

Anticipating Market Developments

As the crypto landscape evolves, the report concludes with insights into the ongoing shift away from Bitcoin, signaling the maturity of the sector.

With the recent SEC decision on Bitcoin ETFs, 2024 is expected to witness a push for more mature market infrastructure, fostering a healthier and competitive ecosystem in primary crypto markets.