Cryptocurrency Crime Plummets by 65% in 2023, Research Shows

A recent research study reveals a significant 65% decrease in cryptocurrency crimes in 2023

Cryptocurrency has gained popularity and legitimacy as digital money in recent years. Still, it also faces challenges from cybercriminals who seek to exploit its vulnerabilities and anonymity. However, according to a new report from Chainalysis, a blockchain data platform, cryptocurrency crime decreased significantly in the first half of 2023 compared to last year.

The report, titled Crypto Crime Midyear Update, shows that cryptocurrency inflows to known illicit entities have declined by a staggering US$5.2 billion (a 65% decrease) compared to the same time last year, while inflows to risky entities such as high-risk exchanges and crypto mixers are down 42%. The report covers various categories of crypto crime, such as hacks, malware, fraud, darknet markets, ransomware, and sanctions evasion.

The most notable decline was observed in scam revenues, which dropped by 77% from US$3.3 billion to US$1.0 billion in the first half of 2023. This is especially impressive given that scam revenues had already fallen 46% in 2022. The report attributes this decline to the collapse of FTX. This major Ponzi scheme defrauded investors of over US$2 billion in 2022, as well as the increased awareness and vigilance of crypto users and regulators.

However, not all types of scams have decreased. The report warns that impersonation scams, in which fraudsters pretend to be law enforcement officers or other authority figures to extort money from victims, have only seen a 23% decline in inflows in 2023. Moreover, the number of individual transfers to impersonation scam addresses has increased by 49% year-over-year, suggesting that more people have fallen victim to this type of scam in 2023.

The report also highlights ransomware as the only form of crypto crime growing in 2023. Ransomware is a type of malware that encrypts the data or systems of victims and demands a ransom in cryptocurrency for their release. According to the report, ransomware attackers have extorted at least US$449.1 million from victims in the first half of 2023, which is on pace to surpass the US$939.9 million set in 2021.

The report explains that ransomware has become more sophisticated and lucrative as attackers target larger organizations and demand higher ransoms. The report also notes that ransomware groups often use crypto mixers or high-risk exchanges to launder their proceeds and evade detection. The report urges businesses and governments to take preventive measures and cooperate with law enforcement agencies to combat ransomware.

The report concludes that the overall decline in crypto crime is a positive sign for the crypto industry and its users, as it reflects the increased security and regulation of the crypto ecosystem. The report states that "crypto crime is becoming less profitable and more difficult for criminals to carry out" and that "the vast majority of cryptocurrency activity is legitimate."

The report also acknowledges that crypto crime is still a serious threat that requires constant monitoring and innovation from both the public and private sectors. The report recommends that crypto businesses adopt best practices such as implementing compliance programs, conducting due diligence on customers and partners, and reporting suspicious activity to authorities. The report also encourages crypto users to be cautious and informed when engaging with crypto platforms and services.

The report analyzes blockchain data from over 100 cryptocurrencies and tokens and other sources such as public reports, court documents, media articles, and expert interviews. The report is part of Chainalysis's ongoing research on crypto crime and its impact on the crypto industry and society.