Chainalysis: Crypto Crime Outlets Have Become Limited

Blockchain analysis firm Chainalysis says in a new report that crypto crime fighting has been effective to some degree. While the amount of crime hasn’t necessarily fallen in recent years, the fight against it has limited criminals to certain platforms when cashing out, transferring their stolen funds into fiat, or engaging in illicit transactions.

New Chainalysis Report Says Criminals Don’t Have That Many Enterprises

In its report, Chainalysis says most criminals are limited to about 915 digital platforms to engage in illegal transfers. This is the smallest number recorded since 2012, arguably a year when crypto was still very new and in development. The analysis company also said that many illicit firms have gone out of business in recent years, thus keeping criminals contained to fewer options as they no longer have the large havens to explore when engaging in illegal transactions.

In addition, Chainalysis said that of the 915 available choices, roughly five firms handle about 68 percent of the crypto space’s illicit trades and cash outs. Kim Grauer – the director of research at Chainalysis – explained in a statement:

It’s shocking to see some of these deposit addresses moving more than a hundred million dollars in illicit funds and still operating when it’s something that’s extremely transparent and easy to see with blockchain analytics, so it does seem like a good choke point where we can shut down, profile, and (to some degree) eradicate this activity.

Grauer continued by saying the report does not make clear whether crime in the space has fallen or risen over the past year. Grauer says the details are rather tricky and mentions:

You don’t carry out a ransomware attack if there’s no way of converting that ransom into something usable. What we’re really seeing OFAC doing, and what we’ve really highlighted, is that the money-laundering off-ramps are what’s facilitating crime, and I think the ongoing crackdown has shown that people understand they’re at a point where there can be meaningful intervention.

Last year, much of the crime appeared to take on more of a “white collar” appearance. For example, it has been alleged that failed digital lending protocol Celsius misused customer funds prior to its bankruptcy, which began in the summer of 2022.

The same was reported for FTX, the golden child of the crypto arena. The company’s founder and chief executive Sam Bankman-Fried was accused of using customer funds to pay off loans for his other firm Alameda Research and to purchase luxury Bahamian real estate.

How Do You Control This?

An anonymous Treasury official explained:

The way you get at money laundering on a broad scale is you slowly whittle down the number of open vulnerabilities. Little by little you make the gaps fewer and fewer, smaller and smaller. If you close more gaps in the dam, more water flows through those open holes.

Tags: Chainalysis, crypto crime, FTX