Blockchain analysis company Chainalysis recently revealed that about 99.6 percent of digital currency transactions adhere to lawful and approved practices.
According to the company’s report, illicit cryptocurrency transactions made up only 0.34 percent of the total cryptocurrency volume in 2023, amounting to $24.2 billion. This figure marks a decline from the 0.42 percent recorded in 2022, which accounted for $39.6 billion.
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A closer look at the data reveals a significant decline in scamming and stolen funds, while revenues from ransomware and darknet markets have seen growth.
Meanwhile, transactions involving sanctioned entities and jurisdictions comprised over half of all illicit transaction volume in 2023. This is a notable shift from the pre-2021 scenario when these categories represented only a small fraction. The surge in sanctioned entities in 2022 is likely a result of sanctions imposed after the Russian invasion of Ukraine.
These statistics challenge public statements by influential business leaders. JPMorgan Chase & Co. CEO Jamie Dimon, for example, has expressed concerns about cryptocurrency’s alleged involvement in illegal activities like tax evasion, money laundering and terrorism financing.
According to the latest Global Financial Crime Report published by Nasdaq, approximately $3.1 trillion in illicit funds flowed through the global financial system in the year 2023. The report outlines specific figures, indicating that drug trafficking contributed $782.9 billion, human trafficking $346.7 billion and terrorist financing amounted to $11.5 billion.
However, it’s worth noting that the Chainalysis figures exclusively pertain to funds from crypto-related crimes. The report specifically focuses on funds stolen in crypto hacks and those directed to addresses identified as illicit, omitting funds from non-crypto crimes, market manipulation or cryptocurrency money laundering.
Despite the decline, reports suggested that cryptocurrency-related crime remains relatively small when compared to broader illicit activities in the financial industry.
Stablecoins surpass Bitcoin in illicit transactions
In addition to the findings, the report also pointed out that stablecoins have now taken the lead as the primary crypto asset used in illicit activities. The digital currencies have surpassed Bitcoin, which held that position until 2021 due to its high liquidity.
While Bitcoin continued its dominance in various cryptocurrency-based crimes, including darknet market sales and ransomware, its involvement in illicit transactions has steadily decreased over the past five years.
In contrast, the report revealed that stablecoins contributed to 70 percent of crypto scam transactions in 2023. These digital currencies were also involved in 83 percent of crypto payments to nations facing sanctions, including Iran and Russia. Meanwhile, 84 percent of transactions specifically target sanctioned individuals and entities.
These figures significantly surpass the overall growth in stablecoin usage, constituting 59 percent of all legitimate cryptocurrency transaction volume in 2023. Chainalysis also identified a total of $40 billion in illicit stablecoin transactions during 2022 and 2023.
The primary category of stablecoin-enabled crime was sanctions evasion, accounting for more than half of the $24.2 billion in criminal transactions observed across all cryptocurrencies in 2023.
According to Andrew Fierman, Chainalysis’ head of sanctions strategy, stablecoins provide sanctioned individuals and countries with a means to bypass restrictions on accessing stable currencies like the U.S. dollar, particularly in regions like Iran and for those involved in money laundering.
In response to these findings, Tether Holdings, a major issuer of stablecoins, denied any association with criminal activities and sanctions evasion. Tether Holdings stressed its commitment to transparency, compliance and collaboration with global authorities. The company also highlighted its capability to freeze funds connected to illicit activities.
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