Illegal crypto activity's value 'down 20% in 2024' despite rise in ransomware

Illicit transactions dropped to $16.7 billion in the first half of the year, an indication that legitimate activity is growing faster, Chainalysis says

The cryptocurrency industry has continuously struggled with cybercriminals, who find increasingly sophisticated ways to exploit vulnerabilities. AFP

The value of illegal activity in the cryptocurrency sector fell by about 20 per cent annually in the first half of 2024, despite a rise in stolen funds and ransomware attacks, a report from Chainalysis has shown.

Illicit transactions dropped to $16.7 billion, from $20.9 billion, in the first six months of the year, an indication that legitimate activity is growing faster, the New York-based blockchain company said in its midyear review this week.

However, the flow of stolen funds almost doubled from to $1.58 billion, from $857 million, while ransomware inflows increased by about 2 per cent to $459.8 million, from $449.1 million in the same period last year.

“So far this year, inflows to legitimate services are the highest they’ve been since 2021, the previous bull market peak. This encouraging sign points to the continued adoption of crypto globally,” analysts at Chainalysis wrote in the study.

The cryptocurrency industry has struggled with a spate of challenges, most notably regulators attempting to establish some control over the industry amid questions over how the sector operates and the opportunity for cybercriminals to exploit it.

The situation came to a head in 2022, one of the most tumultuous in cryptocurrency history, with the implosion of several large companies including Celsius Network, Three Arrows Capital and, most prominently, Sam Bankman-Fried's FTX.

“With any new technology, adoption will grow among both good and bad actors. And while illicit activity is down year-to-date compared to previous years, crypto inflows to specific cybercrime-related entities show some worrying trends,” the Chainalysis analysts said.

This is reflected in Chainalysis' projection that 2024 will potentially be the highest-grossing ransomware year.

Ransomware attacks over crypto activity already set a record last year, with more than $1 billion in ransoms paid, Chainalysis data shows. But in the six months to June last year, Chainalysis reported cumulative ransomware payments at more than $449 million; in the same period this year, this is already up at about $460 million, “setting 2024 firmly on track for the worst year on record”, it said.

Ransomware attacks are also getting demonstrably worse with the increase in the maximum ransom payment recorded in any given year, according to Chainalysis.

So far this year, the largest single payment ever recorded was about $75 million to a ransomware group known as Dark Angels – a 96 per cent annual jump in the maximum payment from last year and a 335 per cent increase from 2022, its data shows.

“If the rapidly increasing maximum payment amount were not bad enough, it is doubly discouraging that this trend in the outlier value for each year is actually mirrored by a growing trend in the median payment. This trend is especially common among the most-damaging ransomware events,” it added.

The average amount of cryptocurrency stolen per heist in 2024 jumped by about 80 per cent, a stark contrast to the 50 per cent decline recorded last year, compared to the previous year, Chainalysis found.

Part of this increase is attributable to the rise in the price of Bitcoin, which accounted for about 40 per cent of the total transaction volume associated with these heists, it said.

Bitcoin, the world's biggest cryptocurrency, leapt to a record of about $74,000 in March, which, at that point, was a 67 per cent year-to-date jump. Since then, however, it has been on the retreat again; it was trading at about $59,200 on Saturday, data from CoinMarketCap shows.

Crypto thieves have also apparently “returned to their roots” by targeting centralised exchanges with greater frequency rather than prioritising decentralised finance protocols, which are less popular vehicles for trading Bitcoin, Chainalysis said.

“This year has seen a resurgence of hacking activity. Comparing both amounts stolen and the number of hacking incidents year-on-year is telling,” it said.

“While attacks on DeFi services … were at their peak in 2022, we speculated that attackers had turned their attention to newer, more vulnerable organisations after centralised exchanges had increased their investments in security.”