Cryptocurrency crime down 65% in 2023 but ransomware attacks on the rise

Amount stolen by fraudsters fell by $3.3bn during the first half, Chainalysis report says

The cryptocurrency sector remains a lucrative target for cyber criminals. Reuters
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Cryptocurrency-linked criminal activity was significantly down through the first half of 2023 as Bitcoin recovered from a brutal bear market last year, a Chainalysis study has shown.

Cryptocurrency inflows to known illicit entities are down 65 per cent, or more than $5.2 billion, compared with where they were at the same time in 2022, the New York-based blockchain company said in its semi-annual report on Wednesday.

Cases of fraud took the biggest hit, with the amount swindled by perpetrators of these crimes $3.3 billion lower in the six months to the end of June, a decline of more than three quarters, the report said.

That is about three times larger than the next category, hacks, in which inflows fell by about $1.1 billion.

However, ransomware remains a problem. Inflows increased by about $176 million, making it the only segment to post a gain in the first six months of 2023, Chainalysis said.

That puts ransomware on pace for its second-biggest year on record, with at least $449.1 million extorted during the period, the report said.

If this pace continues, ransomware attackers will potentially be able to extort about $900 million from victims in 2023, within range of the $940 million stolen in 2021, it said.

Still, the findings of the study show that 2023 is “off to a good start”, with Chainalysis saying regulatory partnerships were behind the success registered in the fight against criminal activity in the cryptocurrency sector.

“This decrease in inflows to illicit addresses shows that the efforts of both the private and public sectors are paying off. Law enforcement pressure appears to be dampening criminal activity while crypto businesses are doing their part in protecting users,” it said.

Chainalysis said the efforts were preventing the types of hacks that have been prevalent in previous years.

“However, the persistent scourge of ransomware demonstrates the need to remain vigilant,” it said.

Illicit activity within the cryptocurrency sector remains rampant as it is a lucrative target for cyber criminals, who take advantage of unsuspecting users.

In turn, this has compounded the woes the sector has experienced, especially over the past year.

The cryptocurrency industry has struggled with continued price declines since last year.

Its market capitalisation peaked at more than $3 trillion in November 2021 but has since dropped. As of Wednesday, it stood at about $1.19 trillion, a plunge of more than 60 per cent, according to data from CoinMarketCap.

Bitcoin, the first and biggest cryptocurrency, fell below $16,000 in November – a year after it hit a peak of almost $68,000 – after a series of events rattled the industry.

These include the collapse of a number of digital asset companies, most notably the bankruptcy of the once-dominant FTX, and a series of investigations by authorities.

The cryptocurrency has since recovered and was priced at about $30,696 at 2pm UAE time on Wednesday.

It is up more than 93 per cent from the November low point and about 86 per cent higher so far this year, CoinMarketCap data showed.

The data from Chainalysis serves as an important reminder that businesses “should continue to shore up their cyber security and data backup procedures for added protection”, it said.

During the first half, impersonation fraud, in which criminals pretend to be law enforcement officers or other authority figures to extort money, registered a 23 per cent decline in inflows, compared with 77 per cent for fraud as a whole, the Chainalysis report said.

More alarmingly, the number of individual transfers to impersonators has risen by about half on an annual basis, suggesting that more people have fallen victim to impersonation fraud in 2023, even if the total amount lost is lower, it said.

The latest report from Chainalysis suggests cryptocurrency crime will remain elevated and of concern.

The value of illicit cryptocurrency transactions hit a record $20 billion in 2022 amid arguably the most troublesome year for the highly volatile industry, Chainalysis said in its annual report earlier this year.

Also, the value of cryptocurrency stolen touched a high of $3.8 billion in 2022 as hacking activity remained rampant, Chainalysis said in February.

That is up more than 15 per cent, compared with the $3.3 billion recorded in 2021, and an almost eightfold increase from 2020's $500 million.

The latest data shows “that even with total scam revenue down, law enforcement and crypto compliance teams can’t rest on their laurels”, Chainalysis said.

Updated: July 12, 2023, 1:00 PM