A recent crypto crime report by blockchain analytics firm Chainalysis has revealed that the vast majority of cryptocurrency transactions, approximately 99.6%, are used for legal purposes. The study sheds light on the evolving landscape of cryptocurrency usage and challenges prevailing narratives surrounding illicit activities in the crypto space.
According to the report, the total value of cryptocurrency sent to illicit addresses witnessed a significant decrease from $39.6 billion in 2022 to $24.2 billion in 2023. The 2022 figure was partly inflated by $8.7 billion in FTX creditor claims following the collapse of the Sam Bankman-Fried-led startup.
Crypto Is Legit, Chainalysis Says
The findings presented by Chainalysis indicate that illicit cryptocurrency transactions accounted for just 0.34% of all cryptocurrency volume in 2023, down from 0.42% in 2022 and a substantial decline from 1.3% in 2019.
These figures challenge public statements made by influential business leaders, such as JPMorgan Chase & Co. CEO Jamie Dimon, who have expressed concerns about cryptocurrency’s role in illegal activities like tax avoidance, money laundering, and terrorism financing.
Crypto fans, including as Edward Snowden, laughed Dimon off for what they saw as an overly dramatic stance.
Wild how the @SECGov approving a #Bitcoin ETF was all it took to transform the CEO of @JPMorgan from the King of Money into that guy who spends one half of every interview insisting “I don’t care about Bitcoin,” and the other half sobbing that it stole his wife and shot his dog.
— Edward Snowden (@Snowden) January 17, 2024
However, it is important to note that the Chainalysis figures do not encompass funds derived from non-crypto native crime, potential market manipulation, or funds associated with crypto money laundering.
The report focuses solely on funds stolen in crypto hacks and those directed to addresses identified as illicit.
Despite the decline, it is worth highlighting that cryptocurrency-related crime remains small in comparison to illicit activities within the broader financial industry.
Total crypto market cap at $1.12 trillion on the weekend chart: TradingView.com
The most recent Global Financial Crime Report by Nasdaq estimates that over $3.1 trillion in illicit funds circulated through the global financial system in 2023. Notably, drug trafficking accounted for $782.9 billion, human trafficking for $346.7 billion, and terrorist financing for $11.5 billion.
Bitcoin-Related Crimes Dropping
The Chainalysis report also sheds light on the evolving trends in cryptocurrency usage for illicit purposes. While Bitcoin had been the leading cryptocurrency used by cybercriminals until 2021 due to its high liquidity nature, its volume in illicit transactions has been consistently decreasing over the past five years.
Bitcoin's volume in illicit transactions has been consistently down over the past five years. Image: Freepik
In its place, stablecoins, such as Tether, have emerged as prominent players in both legitimate and illicit activities within the cryptocurrency market.
The rise of stablecoins in illicit transactions highlights the need for continued vigilance and regulatory measures to address potential risks. It is crucial for authorities, industry players, and law enforcement agencies to remain proactive in identifying and mitigating illicit activities while simultaneously fostering innovation and growth within the cryptocurrency sector.
Overall, the Chainalysis report provides valuable insights into the state of cryptocurrency transactions, revealing that the overwhelming majority are conducted for legal purposes.
The decline in illicit usage signifies progress in building a more secure and compliant crypto ecosystem. However, the report serves as a reminder that ongoing efforts are necessary to address potential risks and ensure the responsible use of cryptocurrencies in an increasingly digital financial landscape.
Featured image from Freepik
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