Chainalysis Report Shows Crypto Crime Decrease By 29% in 2023
As criminals intensify their activities in the crypto sector investors expressed concerns about the safety of the digital industry. The rise of crypto crime has attracted the attention of global investors and blockchain security firms.
On Wednesday the Chainalysis team reviewed the 2023 crypto-related crimes. In their findings, the Chainalysis team noted that the amount stolen from the crypto sector in 2023 was less than a third of that of 2022. This implies that in 2022 investors lost a substantial amount of crypto compared to 2023.
Rise of Crypto Crime
The Chainalysis team noted revenue generated from illicit crypto activities dropped by 54% in 2023. Subsequently, the blockchain analytic firms observed that crypto assets stolen from the on-chain platform dropped to 0.34% from 0.42% in 2022.
Similarly, the report illustrated that the amount of stolen crypto assets dropped to $24.2 billion from $39.6 billion in 2022. Based on the Chainalysis research the blockchain analysts noted that most crypto-related crimes were executed in 2022.
To examine the damages caused by the hacks, illicit activities and fraudulent schemes Chainalysis examined the factors contributing to the rise of crypto crimes.
They observed that the number of crypto crimes increased in 2022 due to the FTX implosion which resulted in a loss of over $8.7 billion. Following the collapse of the Bahamian crypto exchange Chainalysis noted that most of the customers were plunged into financial woes.
This illustrated that the liquidation of FTX affected most of the customers and businesses exposed to the controversial crypto exchange. The huge losses linked to the collapse of FTX forced the Chainalysis team to exclude the transaction volumes tied to the collapsed crypto exchange on its annual report.
The Chainalysis team grouped losses from the FTX under the illicit activities categories.
2023 Crypto Crime Analysis
Besides the FTX saga, the Chainalysis team noted that the notorious illicit groups shifted their focus to the crypto industry. A review of the 2023 hacking incidents demonstrated that the hackers managed to escape with substantial amounts of crypto assets.
In August, nearly $7 million was drained from the Optimism Network. Shortly after the Optimism incident, the Canadian regulatory authorities noted that over $22.5 million was lost in crypto scams.
Later in November the US Department of Justice convicted three crypto investors Zhong Shi Gao, Fei Jiang and Naifeng Xu for laundering over $10 million in cryptos. Remarkably the enforcement action taken by global regulators impacted the recovery of measurable amounts of crypto assets.
From the Chainalysis assessment, the blockchain analyst noted that the criminals are targeting to steal stablecoin due to its ability to store value amid the volatile crypto market.
In the previous bull market, the scammers preyed on Bitcoin investment to maximize their returns. With the pro-long bear market, Chainalysis noted that stablecoin emerged as the preferred cryptocurrency for illicit activities.
Factors Contributing to Increase in Illicit Crypto Activities
Based on the development of the crypto industry the Chainalysis revenue generated from illicit activities such as the ransomware and darknet market increased in 2023 compared to 2022.
The surge in illicit activities in the cryptosphere attracted the attention of global policymakers. For the past few months, Massachusetts Senator Elizabeth Warren called for enforcement action against illegal crypto activities.
Last month Senator Warren condemned pro-crypto legislators for undermining the ongoing clampdown on the use of crypto in terrorism financing. Following the damages caused by the Hamas-Israeli war Senator Warren proposed strategies to weaken the operation of illicit groups.
Firstly the Massachusetts senator drafted a bill of digital assets highlighting the need to regulate the crypto industry. Speaking at the Blockchain Association Senator Warren presented the draft bill and urged the US regulators to collaborate in addressing the crypto terrorism financing schemes.
Since then other US Senators supported the Warren bill for digital assets and urged the Biden administration to address the potential regulatory gaps in the crypto industry.
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