SINGAPORE - The amount of cryptocurrency laundered in the world fell in 2023 on the back of lower trading volume, said blockchain research firm Chainalysis.
It said in its report released on Feb 15 that the global amount of crypto laundered in 2023 fell 29.5 per cent to US$22.2 billion (S$29.9 billion), from US$31.5 billion in 2022.
“Some of this drop may be attributed to an overall decrease in crypto transaction volume, both legitimate and illicit,” said Chainalysis.
From 2019 to 2023, the total amount laundered has risen – it was US$11.1 billion in the initial year.
The report found that centralised exchanges remain the primary destination for funds sent from illicit addresses, as criminals find it easier to convert cryptocurrencies into fiat. It added that the rate at which funds were sent from such addresses “has remained relatively stable over the last five years”.
Chainalysis also said the number of illicit services used to launder the funds has shrunk over time.
However, it said the share of illicit funds going to decentralised finance (DeFi) protocols has grown. DeFi refers to an emerging financial system that uses cryptocurrencies and blockchain technology to manage financial transactions.
“We attribute this primarily to the overall growth of DeFi generally during the time period, but must also note that DeFi’s inherent transparency generally makes it a poor choice for obfuscating the movement of funds,” the firm noted.
While the share of illicit funds moving to illicit services has gone down, Chainalysis said it recorded a huge increase in the volume of funds sent to blockchain bridges from addresses associated with stolen funds.
A blockchain bridge links multiple separate blockchains to allow the transfer of data and assets between them.
Chainalysis also said it observed a substantial increase in funds sent from ransomware to gambling platforms, and in funds sent to bridges from ransomware wallets.
In all, crypto criminals are diversifying their money laundering activity across more addresses in order to better conceal their activity from law enforcement and exchange compliance teams.
Said the firm: “Spreading the activity across more addresses may also be a strategy to lessen the impact of any one deposit address being frozen for suspicious activity.
“As a result, fighting crypto crime via the targeting of money laundering infrastructure may require greater diligence and understanding of interconnectedness through on-chain activity than in the past, as the activity is more diffused.”
