This includes addresses that were identified as being associated with terrorist financing, scams, and those that have been sanctioned.
Cryptocurrencies allow people to send money around the world without using the financial system and the transactions are recorded on blockchain technology. Here, the senders and receivers are identified only by their wallet addresses, a combination of letters and numbers. Nonetheless, not all transactions are so secure. Chainalysis counted the crypto that was sent to wallet addresses that were identified as illicit, and the amount of funds that were stolen during crypto hacks.
The report revealed that sanctioned entities and jurisdictions accounted for a combined USD 14.9 billion worth of illicit transaction volume in 2023, representing 61.5% of all illicit transaction volume measured for the year. Most of this total came from crypto services that were sanctioned by the US or located in the US. Chainalysis also shows that the USD 24.2 billion number is almost certainly an underestimation and will rise as it identifies more illicit addresses, as it has already doubled its 2022 estimate to USD 39.6 billion from USD 20.6 billion.
Moreover, according to Chainalysis, revenue from crypto scams and hacking declined in 2023. However, ransomware and darknet markets saw a rise in revenue. The report identified various other types of illicit addresses including those linked to terrorist financing, cybercrime, and child abuse material.
The US officials stated that it intends to put an end to crypto firms that fail to report or block illicit money flows. Previously, a US report stated that unregulated cryptocurrency exchanges have become a foundational piece of financial architecture used by organised crime in Southeast Asia.
A report published in June 2023 by Chainalysis shows that 2023 has been a year of recovery for cryptocurrency after a chaotic 2022, with prices of digital assets like Bitcoin up over 80% on the year. Moreover, a series of data shows that cryptocurrency-related crime was already down significantly at that time.
Inflows to illicit addresses were down in nearly every category, but no form of crypto crime has suffered more than scams. Through June, crypto scammers have taken in nearly USD 3.3 billion less in 2023 than they did in 2022, for a total of just over USD 1.0 billion in the year.
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