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For years, the cryptocurrency economy has been riddled with black market sales, theft, ransomware, and money laundering — despite the odd fact that in this economy, virtually every transaction is written to a blockchain’s permanent, immutable ledger. However, new evidence suggests that years of advances in tracing blockchains and cracking down on this illicit underworld could have an impact – if the overall volume of crime is not reduced, then at least the number of money laundering operations will be reduced, leaving the crypto black market less Options to pay out its proceeds than in a decade.
In part of its annual crime report focused on money laundering, released today, cryptocurrency tracking firm Chainalysis points to a new consolidation in cryptocurrency withdrawal services over the past year. It counted just 915 of these services being used in 2022, the fewest since 2012 and the latest sign of a steady decline in the number of these services since 2018. Chainalysis says an even smaller number of exchanges now allow money laundering and cryptocurrency trading against actual dollars, euros, and yen: It was found that just five cryptocurrency exchanges now handle almost 68 percent of all black market withdrawals.
In fact, Chainalysis saw that just 542 cryptocurrency deposit addresses received more than half of the total $6.3 billion in illicit funds they tracked to these withdrawal services in 2022, and only four addresses received $1.1 billion -dollars of these funds.
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This intense narrowing of so-called “off-ramps” for cryptocrime is the result of an ongoing government crackdown on crypto-money laundering and a sign of additional enforcement along the way, says Kim Grauer, research director of Chainalysis. “It’s shocking to see that some of these deposit addresses are moving upwards of a hundred million dollars in illicit funds and are still operating when it’s something that’s extremely transparent and easily detectable with blockchain analytics,” Grauer says. “So it seems like a good bottleneck where we can shut down and profile and — to some extent — eradicate this activity.”
Meanwhile, whether the total amount of cryptocrime has increased or decreased in 2022 is far from clear: Data from Chainalysis has shown that criminal use of cryptocurrency has increased over the past year, despite the sharp drop in cryptocurrency exchange rates. But those numbers include a huge spike in illicit transactions on sanctioned cryptocurrency exchanges — which may have less to do with a rise in crime and more to do with the U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) increasingly imposing these sanctions on key players in the cryptocurrency Subsoil imposed. For example, in April last year, OFAC sanctioned Garantex, a Russia-based exchange that allegedly laundered over $100 million in criminal proceeds, including ransomware payments. The year before, it sanctioned two other Russian exchanges, Chatex and Suex, which have since gone out of business. And just last week, OFAC approved another exchange, Bitzlato, and the Justice Department indicted its Russian founder, Anatoly Legkodymov, and took his operation offline.