In addition to the SEC’s approval of Spot Bitcoin ETFs in January, and the unveiling of the Central Bank of the UAE’s stablecoin regulations last month, the crypto sector has been bolstered by another significant development. New research by Chainalysis, the blockchain data company, has shown that while the year to date flow of crypto funds to legitimate services has reached their highest levels since 2021, aggregate illicit activity over the same period fell by an impressive 19.6%, dropping from $20.9 billion to $16.7 billion.
“It is highly encouraging to see that criminal activity continues to become an ever-shrinking share of the crypto ecosystem. The growth of legitimate activity outpacing that of illicit activity on-chain demonstrates the continued transition of cryptocurrencies to the mainstream. Just as with traditional financial systems, it is unlikely that illicit activity will be entirely eradicated,” said Eric Jardine, Cybercrime Research Lead at Chainalysis.
📣 Part 1 of our mid-year #cryptocrime update is here! 🔎 Illicit on-chain activity dropped by nearly 20% YTD, but stolen fund activity is surging and ransomware payments are breaking records. Read our blog for a detailed analysis. https://t.co/WRGG91mpFP
— Chainalysis (@chainalysis) August 15, 2024
Ransomware Continues to Rise
While overall, there was a decline in illicit transactions compared to the same period last year, ransomware was a notable exception. At the same point last year, Chainalysis reported cumulative ransomware payments of around $449.1 million through the end of June 2023. This year through the same period, the researchers recorded a total of $459.8 million in ransoms paid, setting 2024 firmly on track to be the worst year on record.
“One of the reasons why we believe that 2024 is on track to be the highest grossing ransomware year yet, is that if we look at the year to date performance this year compared to last year, we see that there have been about 2% more total ransomware payment volume recorded on chain. Since last year was the worst on record for ransomware activity (with total payments north of $1B), we expect this year to be as bad if not worse, given the comparative year to date payment levels,” added Jardin.
Another finding suggests the ballooning of the maximum ransom payment observed in a given year. Thus far, 2024 saw the largest single payment ever recorded at approximately $75 million to a ransomware group known as Dark Angels. This increase in the maximum payment size signifies a 96% year-on-year growth from 2023 and a 335% rise compared to the maximum payment in 2022.
Bitcoin Back in Cryptocriminals’ Crosshairs
After a 50% drawdown in crypto value stolen in 2023 compared to 2022, this year has also seen a resurgence in hacking activity. The cumulative value stolen year to date in 2024 has already crested $1.58 billion, which is around 84.4% greater than the value stolen over the same period last year. Interestingly, the number of hacking incidents in 2024 has only marginally outpaced that of 2023, rising at just 2.76% year-on-year. Much of the change in the value compromised, therefore, is attributable to rising asset prices, particularly Bitcoin which accounted for 40% of the transaction volume associated with the post-hack movement of stolen funds. This also suggests that crypto thieves are ‘returning to their roots’ by targeting centralized exchanges with greater frequency rather than prioritizing DeFi protocols, which are less popular vehicles for trading BTC.
Commenting on the divergence of ransomware and hacks from the overall decline in illicit on-chain activities, Jardine said, “These two types of crime are often perpetrated by organised groups that leverage sophisticated cyber infrastructure. The key to disrupting cybercrime is disrupting its supply chains, including attackers, affiliates, partners, infrastructure services providers, launderers, and cash out points. As the operations for crypto heists and ransomware operate almost entirely on the blockchain, law enforcement armed with the right solutions can follow the money to better understand and disrupt these actors’ operations.”
This article has been updated with additional comments from Eric Jardine.
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