The digital currency landscape is seeing a transformation in the way illicit funds are being handled, according to a recent report from Chainalysis. The “2024 Crypto Crime Money Laundering Report” draws attention to criminals’ evolving strategies to conceal the origins of their cryptocurrencies and the successful efforts by law enforcement to combat these actions. While blockchain technology provides transparency of transactions, offenders continue to find ways to convert their cryptocurrencies to fiat currency without detection.
Detecting a Dip in Illicit Crypto Transactions
New data from Chainalysis indicates a substantial reduction in the amount of cryptocurrency linked to illegal activities being transferred in 2023. Illicit addresses sent $22.2 billion worth of cryptocurrency to various services, significantly lower than the $31.5 billion recorded in 2022. The decline is more pronounced than the 14.9% decrease in overall cryptocurrency transaction volume, suggesting that efforts to curb money laundering are making an impact.
Crackdowns on Crypto Mixers Bear Results
The report attributes the downturn in crypto money laundering partly to the intense enforcement actions by US authorities against crypto mixers. These mixers, which integrate illegal funds to mask their sources, have seen a substantial drop in their usage due to legal pressures. Noteworthy is the shutdown of Tornado Cash in August 2022 and Sinbad in November 2023, which have disrupted the operations of criminals who depended on mixers for fund obfuscation.
The aftereffects are evident as the volume of funds sent from illicit addresses to mixers plummeted from $1.0 billion in 2022 to $504.3 million in 2023. Despite these setbacks for launderers, the Lazarus Group, a notorious North Korean hacking entity, has demonstrated a rapid adaptation. It has been channeling funds through YoMix, which saw its activity quintuple in 2023, with a significant proportion of its inputs linked to crypto heists.
Chainalysis also notes a shift towards decentralized finance (DeFi) platforms by launderers. With an uptick in illicit funds moving into gambling services and bridge protocols, it’s clear that the strategies employed to disguise the origins of illegal crypto are continuously evolving. The report emphasizes the need for ongoing vigilance and adaptation of regulatory frameworks to keep pace with these changes in the digital asset money laundering arena.