The famous blockchain analysis company Chainalysis says that falling de-fi hacks point to possible improvements in the environment. So, what’s fueling crypto crime these days?
Chainalysis released its latest report on cryptocurrency related crime on March 7. The blockchain analysis company, which became famous in 2020 or helping bring down the Silk Road dark web marketplace, has become well known for providing a picture of the state of the crypto industry. The full 114-page text is worth a careful read, but here we gladly supply a quick overview of the major categories within the report.
Stolen Funds
While Chainalysis sees de-fi networks as a conduit for illegally gotten gains, the company also reported that hacks of de-fi platforms plummeted from $3.1 billion in 2022 to $1.1 billion in 2023. from DeFi protocols. The authors attribute this 63.7% drop at least in part to platform developers’ increasing understanding of the need to create secure places to do business.
Sanctions
According to Chainalysis, in 2019, cryptocurrency operations involving sanctioned entities and jurisdictions accounted for a negligible portion of illegal crypto activity. Since then, sanctions-related activity has climbed steadily to the point that it covered 61.5%, or $14.9 billion of the relevant transaction volume in 2023.
Chainalysis points to the U.S. Office of Foreign Assets Control (OFAC) targeting bigger offenders as well as more of them over time. These entities, such as Garantex in Russia, are not in friendly jurisdictions for enforcing those sanctions, and thus attract the clients that their jurisdictions do tolerate.
Ransomware
Like sanctions-related activity, ransomware has been on the rise since 2019. By Chainalysis’ calculations, ransomware payments in 2023 exceeded $1 billion for the first time. This total only includes direct ransom payments known to the company at the time of publication. Other costs, such as business damage, are not included, and the total is likely to be revised upward. Chainalysis points to their change to the 2022 figure by 24.1% as an example.
Money Laundering
Crypto money laundering that Chainalysis could detect in 2023 totaled $22.2 billion. This is down 29.5% from $31.5 billion in 2022, and is a larger drop than overall crypto transaction volume in 2022.
Stolen Funds
In 2023, the number of cryptocurrency hacks set a record at 231. However, the volume of funds stolen was cut by more than half, from $3.7 billion in 2022 to $1.7 billion in 2023.
Returning to de-fi, Chainalysis points out that the drop is mostly due to a fall in hacks of such platforms. De-fi hacks totaled $3.1 billion in 2022, but only $1.1 billion in 2023. After an analysis of the mechanisms for stealing funds, Chainalysis comes to the conclusion that, “..the drop in raw value stolen from DeFi, and the relative decline in on-chain vulnerability-driven hacking over the course of 2023 suggests that DeFi operators may be getting better at smart contract security.”
