A recent report on crypto crime by blockchain analysis 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 changing landscape of cryptocurrency usage and challenges prevailing narratives surrounding illicit activities in the crypto space.
According to the report, the total value of cryptocurrencies sent to illicit addresses saw a significant decrease from $39.6 billion in 2022 to $24.2 billion in 2023. The 2022 figure was partially inflated by $8.7 billion in claims from creditors of FTX after the collapse of Sam Bankman. Startup led by Fried.
Cryptocurrencies are legit, says Chainalysis
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 defy public statements made by influential business leaders, such as JPMorgan Chase & Co. CEO Jamie Dimon, who have expressed concerns about the role of cryptocurrencies in illegal activities such as tax evasion, money laundering and the financing of terrorism.
Cryptocurrency fans, including Edward Snowden, laughed at Dimon for what they saw as an overly dramatic stance.
Wild like him @SECGov approve a #Bitcoin ETF was all it took to transform the CEO of @JPMorgan from the King of Money to that guy who spends half of every interview insisting "I don't care about Bitcoin" and the other half sobbing because he stole his wife and shot his dog.
โEdward Snowden (@Snowden) January 17, 2024
However, it is important to note that Chainalysis figures do not include funds derived from non-crypto-native crimes, possible market manipulation, or funds associated with crypto money laundering.
The report focuses solely on funds stolen in cryptocurrency hacks and those directed to addresses identified as illicit.
Despite the decline, it is worth noting that cryptocurrency-related crimes remain small compared 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 Nasdaq estimates that more than $3.1 trillion in illicit funds circulated through the global financial system in 2023. In particular, drug trafficking accounted for $782.9 billion, human trafficking $346.7 billion, and terrorism financing. 11.5 billion dollars.
Bitcoin-related crimes are falling
The Chainalysis report also sheds light on changing trends in the use of cryptocurrencies for illicit purposes. While Bitcoin had been the main cryptocurrency used by cybercriminals until 2021 due to its high liquidity, its illicit transaction volume has been steadily declining over the past five years.
Bitcoin's volume in illicit transactions has been consistently down over the past five years. Image: Freepik
Instead, stablecoins, such as Tether, have become prominent players in both legitimate and illicit activities within the cryptocurrency market.
The rise of stablecoins in illicit transactions highlights the need for continued surveillance and regulatory measures to address potential risks. It is critical that authorities, industry players and law enforcement agencies remain proactive in identifying and mitigating illicit activities while encouraging innovation and growth within the cryptocurrency sector.
Overall, the Chainalysis report provides valuable insights into the state of cryptocurrency transactions and reveals that the vast majority are conducted for legal purposes.
The decrease in illicit use means progress in building a more secure and compliant crypto ecosystem. However, the report serves as a reminder that continued efforts are necessary to address potential risks and ensure the responsible use of cryptocurrencies in an increasingly digital financial landscape.
Featured image from Freepik
