Cryptocurrencies are the financial support of illicit organizations around the world. Just last year, At least $24.2 billion was sent to addresses in wallets or crypto wallets linked to these. They are funds related to scammers, terrorists and groups that market material on child abuse, says the latest report from the research firm. Chainalysis.
Cryptocurrencies allow criminals to bypass almost all the controls of the conventional financial system. Blockchain technology still offers a certain anonymity to those who send and receive money this way, identified only by their wallet addresses.
Chainalysis said the reported $24.2 billion is an underestimate, and that the amount is likely to increase as more illicit addresses are identified. It already happened in their 2022 report. They had estimated a transaction volume of 20.6 billion dollars, but that figure eventually reached $39.6 billion.
Most of these addresses are associated with entities or countries sanctioned by the United States for crimes related to the financing of terrorism or money laundering. For example, funds related to Iran and Russia. Combined, these addresses added up to an estimated 14.9 billion dollars in 2023, 61.5% of everything reported by experts.
Cryptocurrencies, ransomware and the darknet
The report highlights that the money managed by cryptocurrency scams and piracy fell in 2023. Contrary to that of the attacks of ransomware —data hijacking— and illegal activities on the Darknet, which have increased its economic flow. “They are two of the most prominent forms of cryptocrime that recorded an increase in revenue in 2023,” the report says. Chainalysis explains that it is likely that attackers are slowly adapting to organizations’ cybersecurity improvements.
In the Darknet markets, those who market child sexual abuse content stand out. The researchers reviewed about 400 cryptocurrency wallets from sellers of this type of material that were active in the last four years. In this way, they identified that More than 10,000 buyers sent funds to them in 2023. For this section of the research, the firm partnered with other organizations such as the Internet Watch Foundation (IWF).
The analysis highlights that sellers of child pornography are increasingly using confidential tools that make it difficult to trace money on the blockchain. For example, the mixers or mixers, as was the case at the time with Tornado Cash, or private cryptocurrencies like Monero.
Relatively few new providers of this illegal content emerged in 2023: just 43, compared to 112 in 2022. But the report warns that these merchants appear to be lasting longer than ever online. On average, the sellers remained on-line 884 days, compared to 560 days in 2022 and 112 days in 2020.
“How is it possible that so many providers of child sexual abuse content can persist for so long?” notes Chainalysis. The data suggests that these actors are acting with relative impunity. “Cryptocurrencies are the dominant option for buyers and sellers of commercial child sexual abuse content,” said Tamsin McNally, director of the Hotline. IWF. For this reason, he pointed out, they have created a special unit to continue the investigation in this regard.
Stablecoins on the rise
Chainalysis data does not include “non-crypto-native” crimes. For example, cryptocurrency payments related to drug trafficking. Nor are those funds associated with crypto platforms accused of fraud that do not yet have firm judicial convictions.
A key fact: stable cryptocurrencies or stablecoins They have become more dominant in the last two years. They now account for the majority of all illicit transaction volume, Chainalysis said. Even above Bitcoin. Some illicit activities, such as sales on Darknet markets and extortion with ransomware, are still predominantly carried out with BTC. Others, such as scams and transactions associated with sanctioned entities, have moved to stablecoins.
Even entities in jurisdictions sanctioned or involved in terrorist financing prefer stablecoins. These organizations “may face more challenges accessing the US dollar through traditional means, but still want to benefit from the stability that this currency provides,” the specialists indicate. They prefer them even despite the risk that issuers of stablecoins freeze the funds when they become aware of their illicit use. This is what he did recently Tetherthe firm behind USDT, with addresses linked to terrorism and wars in Israel and Ukraine.
A report The United Nations warned this week, precisely, that unregulated cryptocurrency exchanges have become “fundamental pieces” of the financing of organized crime. Specifically, in Southeast Asia.
“The expansion of the illicit economy has required a technological revolution in underground banking to enable faster anonymous transactions, the pooling of funds and new business opportunities for organized crime,” the UN says in the report. If you don’t act now, be alert, “The consequences will be seen in Southeast Asia and beyond.”