Sanctioned Entities Flock to Stablecoins Amidst Decline in Illicit Activity: Chainalysis

In 2023, illicit crypto addresses experienced a notable decrease in value to $24.2 billion, with Chainalysis reporting a decline in the share of all crypto transaction volume related to such activity from 0.42% in 2022 to 0.34%, accompanied by a shift in the types of assets involved in crypto-based crime.

In the past two years, stablecoins have overtaken Bitcoin as the preferred crypto for cybercriminals in illicit transactions, particularly in scamming and transactions linked to sanctioned entities, while certain activities like darknet market sales and ransomware extortion continue to be predominantly associated with Bitcoin.

Stablecoin Appeal for Sanctioned Entities

Entities subject to sanctions, those operating in sanctioned regions or involved in financing terrorism, find a heightened incentive to use stablecoins, as accessing the US dollar through conventional means may pose challenges, yet they seek the stability it offers.

However, stablecoin issuers have the ability to freeze funds upon detecting their illicit use, as evidenced by Tether’s recent action against addresses associated with terrorism and war in Israel and Ukraine.

In the “2024 Crypto Crime Trends” report shared with CryptoPotato, Chainalysis disclosed a substantial decline in revenue for crypto scamming and hacking in 2023, with a 29.2% and 54.3% decrease in total illicit revenue, respectively.

Notably, many crypto scammers have shifted to adopting romance scam tactics, targeting individuals and building relationships to promote fraudulent investment opportunities, a strategy that makes them more challenging to uncover compared to widespread advertising.

Ransomware and Darknet Markets Rebound

Contrary to overall trends, ransomware and darknet markets experienced increased revenues in 2023, marking a departure from the previous year’s declines.

Chainalysis said that the resurgence in ransomware earnings suggests that attackers may have adapted to enhanced cybersecurity measures by organizations, while the growth in darknet market revenue follows a 2022 downturn primarily attributed to the closure of Hydra, the once-dominant market.

Although no successor has emerged, the darknet market sector as a whole is rebounding, approaching revenue levels seen in 2021.

The blockchain analysis platform identified a significant trend in illicit transaction volume, highlighting the prevalence of transactions associated with sanctions. In 2023, transactions linked to sanctioned entities and jurisdictions constituted a substantial portion, totaling $14.9 billion, accounting for 61.5% of the measured illicit transaction volume for the year.

This notable figure is mainly attributed to crypto services either sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) or situated in sanctioned jurisdictions operating in areas where US sanctions are not enforced.

While these services can be utilized for illicit purposes, it also implies that part of the $14.9 billion in sanctions-related transaction volume may involve activity from ordinary crypto users residing in those jurisdictions.