The latest report from Chainalysis has revealed a notable drop of 29% in money laundered through cryptocurrency exchanges in 2023. The illicit funds have decreased by approximately $9.3 billion, marking a decline from $31.5 billion in 2022 to $22.2 billion in 2023.
Factors Contributing to the Decline
The decline in money laundering through cryptocurrencies can be attributed to an overall reduction in crypto transaction volume, encompassing both legitimate and illicit activities. Centralized exchanges remain a primary destination for funds from illicit addresses, maintaining a relatively stable rate over the past five years.
Rise of DeFi Protocols and Changing Landscape
Chainalysis points out a shift in the distribution of funds, with a decreasing role of illicit services and a growing share of illicit funds directed towards decentralized finance (DeFi) protocols. The inherent transparency of DeFi makes it less suitable for concealing fund movements, contributing to the overall decline in illicit transactions.
Trends Resembling 2022 with Notable Shifts
The report highlights that the trends observed in 2023 closely resemble those of 2022 in terms of service types used for money laundering. However, there is a slight decrease in the share of illicit funds directed to illicit service types. Instead, there is a noticeable increase in funds moving towards gambling services and bridge protocols.
Specific Changes in Money Laundering Techniques
Examining specific techniques employed by crypto criminals, the report notes a significant increase in funds sent to cross-chain bridges from addresses associated with stolen funds. Additionally, a substantial rise is observed in funds sent from ransomware to gambling platforms, indicating evolving strategies within the criminal ecosystem.
Concentration of Illicit Cryptocurrency in Deposit Addresses
Chainalysis reveals that 109 exchange deposit addresses received over $10 million worth of illicit cryptocurrency each in 2023, collectively amounting to $3.4 billion. While this represents significant concentration, it is noteworthy that in 2022, only 40 addresses received over $10 million in illicit crypto, totaling just under $2.0 billion.
This report sheds light on the evolving landscape of cryptocurrency-related illicit activities, emphasizing the dynamic nature of money laundering techniques and the growing influence of decentralized finance in the crypto space.
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