Insight, News, Security

Chainalysis research finds cryptocurrency crime down but ransomware is increasing

Kim Grauer, Director of Research, Chainalysis.

The outlook of global crypto markets, which have been recovering well this year with the prices of digital assets like Bitcoin up over 80% as of June 30, has been infused with further positivity following the release of the latest Crypto Crime Midyear Update from Chainalysis. This research shows that cryptocurrency inflows to known illicit entities[1] have declined by a staggering US$5.2billion (a 65% decrease) compared to the same time last year, while inflows to risky entities such as high-risk exchanges and crypto mixers are down 42%.

Encouragingly, inflows to illicit addresses are down in nearly every category of crypto crime — from hacks and malware to fraud shops and darknet markets — with the decline in scam revenues being the most significant. As of June, crypto scammers have taken in nearly US$3.3 billion less (at 77% decline) in 2023 than they did in 2022, for a total of just over US$1.0 billion this year. This decline is especially impressive given that last year, crypto scam revenues had already dropped by 46%.

“After a chaotic 2022 which saw significant volatility and the high-profile collapse of FTX, it is reassuring to see confidence return to the crypto markets as asset prices are largely on the rise, and the volume of crypto crime has dropped significantly”, said Kim Grauer, Director of Research at Chainalysis. “This bodes especially well for the UAE, where the government remained fervently committed to its vision of establishing the country as a global crypto hub even through challenging times. These efforts — which include the establishment of the VARA and the introduction of comprehensive regulations for VASPs — ensure that as momentum returns to crypto markets, the country stands out as being especially attractive to businesses, entrepreneurs and investors”.

Chainalysis warned that while scam revenues are lower this year, consumers and businesses should remain especially wary of impersonation scams, in which fraudsters impersonate law enforcement officers or other kinds of authority figures to extort money from victims. This type of scam has only seen a 23% decline in inflows so far in 2023. Worryingly, the number of individual transfers to impersonation scam addresses has actually increased 49% year-over-year, suggesting that more people have fallen victim to impersonation scams in 2023, even if the total amount lost is lower.

Experts from the blockchain data platform also rang the alarm on ransomware, advising businesses to stay vigilant against these attacks as perpetrators of this form of cybercrime are on pace for their second-biggest year ever, having extorted at least US$449.1 million through June. If this pace continues, ransomware attackers will extort US$898.6 million from victims in 2023, trailing only 2021’s US$939.9 million. The return of “big game hunting” represents a significant departure from the trends seen in 2022.

“With the exception of ransomware, our data shows that crypto crime as a whole is in sharp decline in 2023. This decrease in inflows to illicit addresses shows that the efforts of both the private and public sectors are paying off — law enforcement pressure appears to be dampening criminal activity, while crypto businesses are doing their part in protecting users from scams and preventing the hacks that have been such an issue in previous years, especially for DeFi protocols”, said Grauer.

[1] Not including inflows to entities that have been sanctioned or subject to special measures

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