Illicit cryptocurrency transactions reach unprecedented heights despite tough sanctions

Despite a recent market collapse, illicit cryptocurrency transactions increased for the second year in a row, according to a China Analysis report, as sanctions designations increased and hacking reached an all-time high of $20.6 billion.

With the exception of stolen funds, which increased 7% year over year, transaction volumes decreased for all other, more traditional types of cryptocurrency-related crime. According to the report, one potential cause of this is the current market downturn.

“We’ve found in the past that crypto scams, for instance, take in less revenue during bear markets, likely because users are more pessimistic and less likely to believe a scam’s promises of high returns at times when asset prices are declining. In general, less money in crypto overall tends to correlate with less money associated with crypto crime,” said China Analysis.

From 0.12% in 2021 to 0.24% in 2022, the overall percentage of bitcoin activity connected to illegal behavior has increased for the first time since 2019.

“This shouldn’t come as a huge surprise. As one might expect, total transaction volume fell with the onset of the bear market, and as we showed above, illicit transaction volume grew slightly,” reads the report.

Less than 1% of the overall volume is still devoted to illegal activity in the cryptocurrency market. Despite this year’s increase, it’s important to remember that crime as a percentage of all cryptocurrency activity is still on the decline.

The impact of the greatest cryptocurrency sanctions designations in 2022 on cryptocurrency crime was covered in the research.

The key learning was that the effect of cryptocurrency sanctions depended on the jurisdiction and technical limitations.

For example in Morocco, bitcoin and cryptocurrency transactions are banned ever since 2017.

The number of distinct ransomware strains reportedly increased in 2022 despite the decline in revenue, with research from cybersecurity company Fortinet claiming that over 10,000 distinct strains were active in the first half of 2022.

On-chain data shows that the number of active strains has increased dramatically in recent years, yet at any given moment, only a small handful of strains receive the great bulk of ransomware revenue.

According to the data, the majority of ransomware attackers move money they have extorted to well-known, centralized exchanges when it comes to money laundering.