Chainalysis releases mid-year crime report: here's what they found

Today, Chainalysis released its mid-year crime report.

The big figure to know? Crime in the crypto space is down 65 per cent as compared to the same time last year.

Given that the industry is still recovering from various shocks, transaction volumes as a whole are down- but transaction volumes for legitimate services have only seen a 28 per cent decrease, while inflows to risky entities such as mixers are down by 42 per cent.

Specifically, revenues from scams and hacks were the most impacted, dropping by US$3.3 billion and US$1.1 billion respectively.

Malware, darknet markets, child abuse material, and fraud numbers were also down.

The sole exception has been ransomware, which saw a small increase in inflow of around US$175 million.

Scams are still king- but their star is fading

Despite the sharp dropoff of inflows to scam revenue, scams continue to lead the crypto crime industry in terms of revenue.

However, the Chainalysis team notes that the decline is notable for several reasons.

Firstly, the drop in revenue also follows a large drop in scam revenue that the crypto world saw last year, during a bear market.

Secondly, the drop in revenue comes as crypto asset prices are on the rise. When asset prices are on the rise, scammers often draw in more revenue, as they prey on the greed of investors. Yet, scam revenues are down during this period of asset price growth.

Chainalysis credits this years’ drop in scam revenue to the disappearance of two large-scale scams, VidiLook and Chia Tai Tianqing Pharmaceutical Financial Management.

The new threat- ransomware

While revenues for most cryptocurrency crime are down, ransomware is the one area of crypto crime where criminals are making gains.

This year, ransomware attackers have already extorted US$449.1 million, and are on pace to make 2023 their second-best year on record.

The reason for this trend is worrying. Criminals are increasingly targeting large, deep-pocketed organisations, and smaller attacks are also on the rise.

Ransomware attackers managed to get more payments, as well as higher amounts over the past year. What is also concerning is that ransomware attackers are upping the ante when it comes to getting companies to pay the ransom.

Kivu General Counsel and Risk Officer Andrew J. Davis noted that there was an increase in more extreme extortion tactics, such as harassment of employees from victim firms who have not yet paid.

That being said, Davis also noted that plenty of companies are still refusing to pay ransomware attackers, and that this trend may be prompting ransomware attackers to increase the size of their ransom demands, with the intention of maximising profit from those who are still willing to pay.

Overall, however, cryptocurrency crime is in sharp decline- and Chainalysis attributes this to law enforcement pressure, and the efforts of crypto businesses to protect users from scams and hacks.

The trends that the report outlines are cause for both concern and for celebration. With the reduction of cryptocurrency crime, the crypto industry as a whole is better able to reshape its reputation- from one where crypto is merely a facade for criminal activity, to one that is largely legitimate, and where crime is a rare occurrence.

Of course, the battle between criminals and law enforcement will continue, as it always has and always will, but at the very least, crypto crime can be relegated to a position where it belongs- as a very small part on the fringe of the industry. Crime shouldn’t pay- but as the report shows, it often does, and does so handsomely.

And so it falls to us, quite often, to remain vigilant during both the good times and the bad, and to take the appropriate measures to ensure that we do not fall victim to this ever-present threat of crypto crime.