Illegal on-chain cryptocurrency activities reach all-time highs of $20.1B

Illicit cryptocurrency on-chain transaction volume reaches all-time highs of $20.1 billion, growing for the second year in a row, according to a recent report by Chainalysis.

The report said:

We have to stress that this is a lower-bound estimate — our measure of illicit transaction volume is sure to grow over time as we identify new addresses associated with illicit activity.

The figure does not include proceeds from non-crypto native crimes, such as conventional drug trafficking involving cryptocurrency payments.

Of the $20.1 billion, 44% came from activity associated with sanctioned entities. Last year, the U.S. sanctioned cryptocurrency mixing services Blender and Tornado Cash, alleging they were used to launder billions of dollars from North Korea.

Further, the U.S. Office of Foreign Assets Control (OFAC) implemented some of its most severe crypto sanctions in 2022.  It has been estimated that OFAC Sanctions have cost cybercriminals $15M in potential revenue in the past two months.

Conventional Crypto Related crimes declined

On a positive note, the volumes of transactions related to more conventional cryptocurrency-related crimes, such as darknet marketing and terrorism financing, decreased. In contrast, the percentage of crypto funds stolen increased by 7% YOY.

According to Chainalysis, the market downturn of 2022 might explain the slump since the crypto market went below $1 trillion from $3 trillion last year. Previous research has shown that crypto scams are less profitable in bear markets. The report said:

In general, less money in crypto overall tends to correlate with less money associated with crypto crime.

Worth noting that illicit crypto activities have increased for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022.

In addition, illicit activity in cryptocurrency is responsible for less than 1% of the overall volume.  Although crypto-related crime increased in 2022, Chainalysis maintained that the trend remained downward.