The global cryptocurrency markets have received a significant boost of positivity with the release of Chainalysis’ latest Crypto Crime Midyear Update. The research findings indicate a remarkable decline of $5.2 billion (65% decrease) in cryptocurrency inflows to known illicit entities compared to the same period last year. Additionally, inflows to risky entities like high-risk exchanges and crypto mixers have dropped by 42%.
One particularly encouraging trend is the reduction in inflows to illicit addresses across various categories of crypto crime, including hacks, malware, fraud shops, and darknet markets. The decline in scam revenues stands out as the most significant. In 2023, crypto scammers have generated nearly $3.3 billion less (a 77% decline) than in 2022, resulting in a total of just over $1.0 billion this year. This decline is even more impressive considering that crypto scam revenues had already decreased by 46% in the previous year.
Kim Grauer, Director of Research at Chainalysis, expressed reassurance in the return of confidence to the crypto markets after the tumultuous events of 2022, which witnessed significant volatility and the high-profile collapse of FTX. Grauer also acknowledged the positive implications for the United Arab Emirates (UAE), as the government’s steadfast commitment to establishing the country as a global crypto hub is now bearing fruit. The UAE’s efforts, such as the establishment of the VARA and the introduction of comprehensive regulations for Virtual Asset Service Providers (VASPs), contribute to its attractiveness to businesses, entrepreneurs, and investors in the crypto space.
However, Chainalysis cautioned consumers and businesses to remain vigilant against impersonation scams, where fraudsters pose as law enforcement officers or other authoritative figures to extort money from victims. While scam revenues have decreased this year, the decline in inflows to impersonation scam addresses has only been 23% thus far in 2023. Alarmingly, the number of individual transfers to impersonation scam addresses has increased by 49% year-over-year, indicating that more people have fallen victim to such scams, even though the total amount lost is lower.
Experts from Chainalysis also raised concerns about ransomware attacks and advised businesses to remain vigilant against them. Ransomware perpetrators are on track to make 2023 their second-most profitable year, having extorted at least $449.1 million as of June. If this trend continues, victims will lose a staggering $898.6 million to ransomware attackers in 2023, second only to the $939.9 million recorded in 2021. This resurgence of “big game hunting” in ransomware represents a significant departure from the trends observed in 2022.
Kim Grauer highlighted that, aside from ransomware, the data indicates a sharp decline in crypto crime as a whole throughout 2023. This decrease in inflows to illicit addresses suggests that the combined efforts of the private and public sectors are yielding positive results. Law enforcement pressure appears to be suppressing criminal activities, while crypto businesses are playing their part in protecting users from scams and preventing hacks, which have plagued the industry in previous years, particularly in decentralized finance (DeFi) protocols.
