A Chananalysis report has revealed that stablecoins have now become the digital currency of choice for illicit activities.
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Throughout 2021, Bitcoin was the preferred cryptocurrency for cybercriminals, largely because of its high liquidity. However, in the past two years, there has been a shift, and stablecoins now constitute the majority of illicit transaction volume.
This change in preference aligns with the overall increase in stablecoin usage in both legitimate and illicit crypto activities. Despite this trend, bitcoin continues to dominate in specific criminal activities, such as darknet market sales and ransomware extortion.
The report revealed that although Some forms of illicit cryptocurrency activity, such as darknet market sales and ransomware extortion are still done using Bitcoin, scamming and transactions associated with sanctioned entities have shifted to stablecoins.
The report revealed that transactions by sanctioned entities are the biggest forms of crypto crime by transaction volume, thereby driving the larger trend.
Sanctioned entities, as well as those operating in sanctioned jurisdictions or involved with terrorism financing, have mostly shifted to stablecoins due to the challenge they face with accessing the US dollar through traditional means. Since they still want to benefit from the stability the US dollar provides, stablecoins have become the better alternative with low risks and faster processing time.
Stablecoin issuers can however freeze funds when they become aware of their illicit use, just as Tether recently did with addresses linked to terrorism and warfare in Israel and Ukraine.
Decline in Illicit Transaction Volumes
As per Chainalysis, the overall value received by illicit cryptocurrency addresses in 2023 dropped significantly to $24.2 billion, A 15 billion decline from last year’s data.
This figure, according to the analytics firm, is an underestimation and is expected to rise as more illicit addresses are discovered and recorded one year from now.
According to the firm;
“This was the case when we published our Crypto Crime Report last year, we estimated $20.6 billion worth of illicit transaction volume for 2022. One year later, our updated estimate for 2022 is $39.6 billion”
Much of that growth came from the identification of previously unknown, highly active addresses hosted by sanctioned services, as well as the addition of transaction volume associated with services in sanctioned jurisdictions.
Another key reason the new total was much higher than the initial estimate is the addition of the $8.7 billion in creditor claims against FTX in their 2022 report.
