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The year 2023 began with a challenging overall landscape for the crypto market, which continued throughout the year. However, the market saw a recovery with renewed bullish sentiment and ended the year on a positive note.
Additionally, 2023 saw a decline in crypto scams and crypto-related illicit activities compared to the previous year, new data shows.
Fall in revenue from the illicit activities market in 2023
The American blockchain analysis company Chainalysis has published its Crypto Crime Report 2024 detailing trends and figures for crypto-related illicit activity in 2023. The company's data shows a significant decline in the value received in cryptocurrency addresses used for illicit activity, totaling $24.2 billion.
This is a considerable reduction from the updated 2022 estimate of $39.6 billion. Additionally, the share of overall crypto transaction volume associated with illicit activities increased from 0.42% in 2022 to 0.34% in 2023.
According to the report, there appears to be a shift in the type of assets involved in crypto-related criminal activity over the past two years, with Bitcoin no longer being the most used asset for most illicit transactions.
Alternatively, stablecoins have become a more popular choice for crypto assets involved in illicit activities, as the report states. This increase could be attributed to the recent general growth in the share of stablecoins in overall crypto activity.
The shift to stablecoins is not seen in all related crimes, with activities such as darknet market sales and ransomware extortion still taking place primarily in Bitcoin.
Nonetheless, it should be noted that their issuers can trace stablecoins and funds can be frozen when addresses are linked to illicit activities, as Tether did in 2023.
Illicit transaction volume by asset type, 2018-2023. Source: Chainalysis
Trends That Defined Crypto Crime in 2023
On-chain metrics from Chainalysis suggest that scam revenue has been following a global trend since 2021. Although these crimes are still underreported, “overall, scams are declining, given broader market dynamics “.
Romance scams, such as “pig butchery,” are among the most popular crypto scam tactics used by scammers and are one of the largest forms of related crime in terms of transaction volume.
Regarding crypto hacking, the company believes that “the decline in stolen funds is largely driven by a sharp decline in DeFi hacking,” which could represent “the reversal of a worrying long-term trend.” In 2023, revenue from crypto scams and hacking declined significantly, with total revenue decreasing by 29.2% and 54.3%, respectively.
Contrary to general trends, the ransomware and darknet markets, two of the most significant forms of related crime, saw revenue growth in 2023. Similarly, darknet market revenue growth in 2023 comes after revenue declines in 2022.
The report shows that transactions with sanctions-related entities and jurisdictions drive most illicit activity, as entities and jurisdictions shift toward the use of stablecoins and other crypto assets to circumvent restrictions.
They accounted for a combined transaction volume of $14.9 billion in 2023, or 61.5% of all illicit transactions in the year. Chainalysis explains that:
The majority of this total comes from cryptocurrency services that have been sanctioned by the US Treasury Department's Office of Foreign Assets Control (OFAC), or are located in sanctioned jurisdictions, and can continue to operate as they are located in jurisdictions where US sanctions are applied. not applied.
Ultimately, the report highlights that not all sanctions-related transactions are due to illicit use of digital assets, as some of that $14.9 billion volume is tied to average users residing in sanctioned jurisdictions.
Bitcoin trading at $41,906.6 on the hourly chart. Source BTCUSDT on TradingView.com
Featured image from Unsplash.com, chart from TradingView.com
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