Illicit crypto transactions
In 2023, the total value of identified illicit cryptocurrency transactions was $24.2 billion. Although this is a substantial amount in absolute terms, it represents a significant decrease of nearly 40% compared to 2022, when it was $39.6 billion. Many factors likely contributed to the decline in crypto crime in 2023, including increased vigilance from companies, greater fraud awareness among the public, and the element of luck playing a role. Sophisticated criminals may have also improved their methods to avoid detection. In 2023, the U.S. government sanctioned three times more crypto-related entities and individuals than in 2022. At the same time, European police conducted several major crackdowns on crypto-denominated illicit drug marketplaces.
Nearly 60% of the cryptocurrency stolen in 2023 was stolen through infrastructure attacks such as private key theft or seed phrase compromise, up from about 35% in 2022. Each such attack resulted in an average loss of USD 30 million. The next largest attack typologies - protocol attacks and code exploits - accounted for a fifth of hack volumes.
The ten largest hacks accounted for almost 70% of all funds stolen in 2023. Several individual hacks exceeded USD 100 million, among them attacks against Euler Finance (March), Multichain (July), Mixin Network (September) and Poloniex (November).
In addition to the decrease in the total value of illicit activity, the estimated share of cryptocurrency transactions associated with illegal activity also fell, down to 0.34% in 2023 from 0.42% in 2022. However, within these statistics, losses from fraudulent crypto investments increased to $3.94 billion in 2023, which is 53% more than in 2022.
Until 2021, Bitcoin held a dominant position among cybercriminals, mainly due to its high liquidity. This has changed over the past two years, with stablecoins now making up the majority of the volume of all illicit transactions. Darknet market sales and ransomware extortion still predominantly occur in Bitcoin. However, scams and transactions associated with sanctioned entities — which are the largest forms of crypto crime by transaction volume — have shifted to stablecoins.
The demonization of crypto in connection with criminal activities is debatable. The negative societal impact is undeniable, however, the priority should be addressing other types of economic crime, considering two key indicators:
- The share of illegal transactions in total cryptocurrency transactions over the past four years has averaged less than 0.5% per year
- The share of illegal crypto transactions in the overall estimated volume of global financial crime is less than 1%.
Sources:
- Chainalysis - 2024 Crypto Crime Trends: Illicit Activity Down as Scamming and Stolen Funds Fall, But Ransomware and Darknet Markets See Growth, 01/2024, https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/
- Social Capital Markets - Crypto Crime Statistics in 2024, 10/2024, https://socialcapitalmarkets.net/crypto-trading/crypto-crime-statistics/
- TRM - The Illicit Crypto Economy: Key Trends from 2023, 2024, https://www.trmlabs.com/the-illicit-crypto-economy-report
Images: Chainalysis, ChatGPT