Crimes involving cryptocurrency dropped sharply overall last year after hitting a record high in 2022, but experts are sounding the alarm that criminals are getting better at covering their tracks.
The latest crypto crime trend report released by blockchain data platform Chainalysis this week shows illicit transaction volume using digital currencies fell significantly in 2023. Most notably, crypto scamming and hacking revenue saw sharp declines, at 29.2% and 54.3%, respectively.
Eric Jardine, Chainalysis' cybercrimes research lead, said this year’s decrease in scamming and stolen funds can most likely be attributed to a variety of factors.
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"Historically, for example, we have seen scammers do their best when markets are up – which tends to bring new entrants into the market at a rapid pace," Jardine told FOX Business. "While Bitcoin did have a remarkably good year in terms of price appreciation in 2023, we have also observed a longer-term trend where scammers are increasingly relying on stablecoins, thus potentially muting the effects of recent bullish price action."
He said the decline in stolen funds via hacking is likely driven largely by a steep drop-off in decentralized finance (DeFi) hacking, which could mirror a decline in total value locked in the DeFi ecosystem and – more optimistically – signify that DeFi protocols are improving their security practices.
Although crypto crimes were down collectively, there were some forms of criminal activity that actually rose last year: ransomware and darknet markets. Chainalysis speculates ransomware attackers have learned to subvert organizations' cybersecurity improvements, while dark web fraud revenues have rebounded and are approaching 2021 highs.
The analysts also warned that many crypto scammers have adopted tactics that make their crimes more difficult to uncover.
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Rather than advertising their fraudulent investment opportunities far and wide, the report says, more thieves have shifted to romance scams where they target individuals and build relationships with them in order to trick them into handing over their money.
The report noted that FBI data shows reports of crypto investment scams in the U.S. have been on the rise through 2022, while Chainalysis' data suggest scamming revenues on a global scale have been trending down since 2021.
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"Romance scams are continuing to devastate victims, and in particular are often underreported, so the true damage of scamming may be greater than what reporting to the FBI and our on-chain metrics show," Jardine said.
