For many years, The cryptocurrency economy has been rife with black market sales, theft, ransomware and money laundering – despite the strange fact that virtually every transaction in this economy is recorded in a permanent, immutable blockchain ledger. But new evidence suggests that years of advances in blockchain tracking and crackdowns on this illicit underworld may be having an effect — if not reducing overall crime, then at least reducing the number of money-laundering outlets, leaving the crypto black market with there are fewer options to cash in on your earnings than there have been in the last ten years.
As part of its annual Money Laundering Crime Report released today, cryptocurrency tracking firm Chainalysis points to a new consolidation of crypto-criminal cash-out services over the past year. There were only 915 such services in 2022, the lowest number since 2012 and the latest sign of a steady decline since 2018. Chainalysis says an even smaller number of exchanges allow money to be laundered trading cryptocurrency for real dollars, euros and yen: it found that just five cryptocurrency exchanges now handle nearly 68 percent of all black market cash.
In fact, in 2022, Chainalysis observed that only 542 cryptocurrency deposit addresses received more than half of the $6.3 billion in total illicit funds it tracked in these withdrawal services, and only four addresses received $1.1 billion of these funds.
This intense narrowing of so-called crypto-criminal “loans” is a result of the government’s ongoing crackdown on crypto-money laundering and a sign of more enforcement measures on the way, says Kim Grauer, director of research at Chainalysis. “It’s shocking to see some of these escrow addresses move over a hundred million dollars worth of illicit funds and still work when it’s extremely transparent and easy to see with blockchain analytics,” says Grauer. “So it seems like that’s a good point of overlap where we can shut down and profile and — to some degree — root out that activity.”
At the same time, it is far from clear whether the overall number of crypto-crimes increased or decreased in 2022: by some measures, data from Chainalysis showed that the use of cryptocurrency in criminal activities increased last year, despite a sharp drop in cryptocurrency exchange rates. But those numbers include a huge spike in illegal transactions on sanctioned cryptocurrency exchanges — which may have less to do with an increase in crime than with the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) increasingly imposing these sanctions on major players in the crypto-underground. For example, last April, OFAC sanctioned Garantex, a Russian exchange that it said laundered more than $100 million in the proceeds of crime, including ransomware payments. A year earlier, it had sanctioned two other Russian exchanges, Chatex and Suex, which have since shut down. And just last week, OFAC sanctioned another exchange, Bitzlato, and the Justice Department charged its Russian founder, Anatoly Legkodymov, and took him offline.
“You don’t do a ransomware attack if there’s no way to convert that ransom into something usable,” says Grauer. “What we’re really seeing OFAC do, and what we’ve really emphasized, is that money laundering is what fuels crime. And I think the ongoing crackdown has shown that people are realizing that they are at a point where there can be significant intervention.”
