Crypto Crime Plummets in 2023
Overcoming the misunderstood narrative surrounding the blockchain and digital assets and their alleged association with illicit activities.
In a recent edition of Texas Block-Cast, Lee Bratcher, President of the Texas Blockchain Council spoke with Gurvais Grigg, Global Public Sector Chief Technology Officer at Chainalysis. Gurvais had spoken at the North American Blockchain Summit that took place in Fort Worth last November. He joined Lee again to discuss the 2024 Crypto Crime Report amongst other things. You can download a copy here.
Gurvais explained at the outset how the report indicates how illicit activity is on the decline. This can be seen from the drop in the value received by illicit cryptocurrency addresses, he pointed out.
The discussion moved on to how dramatic the size of the drop was. Falling from an all-time high of $39.6 billion in 2022 to a more modest $24.2 billion in 2023. Gurvais highlighted how most cryptocurrencies exchanged globally each year are for lawful and legitimate purposes. And that whilst its important to understand illicit activity, it only represents a small percentage of the ecosystem.
Why we need to pay attention to Bad Actors
We need to pay attention to those who are trying to misuse the ecosystem, Gurvais urged. This is important because we need to be able to counter those malign actors. It’s also important to understand the larger ecosystem and the good that is being done with digital assets.
The overall number of transactions that were related to illicit funds was 0.34% in 2023. Finding this number is unusual, Gurvais explained, as there are almost no other asset classes where you can find out what the percentage of the overall transaction value was used for illicit funds like with digital assets. There is not enough data available to give a true and accurate number. This is one of the powerful things about the blockchain. The transparency of this asset class which allows for this type of analysis.
How does Chainalysis find out about Wallets related to Illicit Funds?
Chainalysis publishes a crypto crime report annually that comes out each February as mentioned above. The report explains the methodology, how the team at Chainalysis gathers data and how they come to the reported analytical conclusions.
Every year Chainalysis puts out an estimate of what illicit fund activity there was in the previous year. The team at Chainalysis also look back into prior years and update prior years estimates. This is done because as time passes there is additional intelligence and insight about the prior year as more addresses become revealed. As more open source intelligence is learned. As governments take actions against sanctioned individuals and identifies additional addresses. Crypto wallet addresses associated with illicit or malign actors. This allows Chainalysis to aggregate additional malign actors and wallet addresses associated with that.
Insight into these wallet addresses has meant that Chainalysis has updated the total illicit funds transacted in blockchain in 2022 from around $20 billion to over $39 billion. Gurvais estimates that next year, 2025, the team at Chainalysis are more than likely to update the total sum received by illicit addresses much as has been the case for 2022. Which means that the estimate may be more than $24.2 billion or 0.34% of the total transactions.
Transparency is key for the Blockchain industry
The work that Gurvais does is “needed by us as an industry association as we work on policy. To have reports and data from you and the team at Chainalysis,” Lee highlighted.
It’s individual investors that are often affected the most by crypto related scams. Some of them known as ‘romance scams’, Gurvais continued. Many individuals also lost their life savings. These are incidents that have occurred outside of failed tokens like Celsius or Luna. Highlighting the need for investors to remain vigilant.
Gurvais encourages individuals to notify the authorities in the case of a crypto related scam. One of the places individuals can do this is through the Internet Crime Complaint Center available at www.ic3.gov.
Why you should report even the smallest crypto-related crime
Gurvais highlighted how every crypto-related scam or crime can be reported at IC3. If any of the followers of Texas Blockchain Council has been a victim of any of those types of crimes to go to the IC3 website and report it. The process is setup to help victims be able to add specific information related to the crime. This can also be undertaken on behalf of somebody like an older relative who may have been the victim.
Regardless of the size of the crime, these individuals who run these fraud schemes are not independent actors. They often work as part of an organized criminal group. Which means that the individual case of $1,000 or $10,000 which might seem like one-offs are part of a much bigger operation. An operation that amounts to hundreds of thousands of dollars in total. Reporting a single incident may not get the attention of a law enforcement agency. However, if cases are reported the data can be unified from the large number of smaller cases, and the aggregate of those cases may be in the millions.
This is important for anybody involved in the digital assets space. Your voice may seem insufficient alone, but as law enforcement becomes more attuned to how malign actors operate, these individual cases will go a long way towards helping keep crypto ‘safe’. Victims may reside in as diverse geographical locations as Oregon, Florida, and Texas, but they will help to identify the malign actor be they in Upstate New York or somewhere across the world.
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