The Chainalysis 2023 Crypto Crime Report would have showed a dramatic decrease without $8.8 billion in sanctions violations, largely from Russia's invasion of Ukraine.
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The proceeds of crypto crime surged last year, with illicit transactions reaching an all-time high of $20 billion.
That's according to a preview of the Chainalysis 2023 Crypto Crime Report, which will be released in February.
There is, however, a very, very big "yes, but" in that figure: $8.8 billion of it involved sanctions violations, which obviously skyrocketed as the Russian invasion of Ukraine led to a huge spike in new sanctions.
What's a Crime?
There's also a second very big "yes, but," Chainalysis said.
Pointing to big collapses like Celsius, Three Arrows Capital, FTX, and others — some amid allegations of fraud — the crypto intelligence firm said:
"Those allegations make this year's Crypto Crime Report a bit tricky, as some feel that those businesses should be treated as criminal enterprises. Ultimately though, we don't include their transaction volumes in our measures of illicit activity because our estimates are based solely on on-chain intelligence — we don't account for instances where, for example, off-chain bookkeeping may have been fraudulent."
Chainalysis also noted that bankruptcies and criminal proceedings remain active, and as a result, it was best to "leave questions of criminality to the legal system."
Stolen funds were relatively stable despite a number of very high-profile hacks like the $625 million Ronin Network attack, $477 million FTX Wallet hack, $320 million Wormhole bridge attack, $180 million Beanstalk stablecoin exploit, $190 million Nomad bridge attack, $160 million Wintermute hack, $100 million BNB Chain hack (which was actually $580 million, but the blockchain was frozen before it could be moved) and many, many others.
Scams, on the other hand, dropped dramatically, as did darknet market sales.
Still Tiny
However, the overall percentage of illicit crypto transactions remained tiny, at just 0.24%.
And while that's double 2021, that sanctions balloon accounts for the vast majority of the increase. Indeed, sanctions violations rose a staggering 10 million percent, Chainalysis said.
Another factor, it added, is that overall cryptocurrency transaction volumes declined steeply with the onset of crypto winter and the ongoing scandals and collapses.
