In light of recent findings by the analytics firm Chainalysis, the often darkly painted image of cryptocurrencies seems to be much brighter than assumed. According to this report, as much as 99.6% of cryptocurrency transactions are conducted entirely legally, shedding new light on how society should perceive this digital phenomenon.
The report reveals that the total value of cryptocurrencies sent to addresses deemed illegal fell from $39.6 billion in 2022 to $24.2 billion in 2023. It’s noteworthy that this decline was recorded despite the high-profile collapse of a startup led by Sam Bankman-Fried, which to some extent inflated the statistics in 2022.
Chainalysis’ analysis indicates that only 0.34% of the total volume of cryptocurrency transactions in 2023 were illegal, a significant decrease compared to 0.42% in 2022 and as much as 1.3% in 2019. These data challenge earlier statements by influential business leaders like Jamie Dimon of JPMorgan Chase & Co., who expressed concerns about cryptocurrencies’ role in tax evasion, money laundering, or financing terrorism.
On the other hand, cryptocurrency enthusiasts have dismissed these concerns as exaggerated. However, it is important to note that Chainalysis’ data do not cover funds derived from crimes not directly utilizing cryptocurrencies, potential market manipulation, or funds associated with money laundering in cryptocurrencies.
Nevertheless, criminal use of cryptocurrencies remains small compared to illegal activities in the broader financial industry. The Global Report on Financial Crime published by Nasdaq estimates that over $3.1 trillion of illegal funds flowed through the global financial system in 2023. Among these, drug trafficking accounted for $782.9 billion, human trafficking $346.7 billion, and terrorism financing $11.5 billion.
The Chainalysis report also sheds light on evolving trends in the use of cryptocurrencies for illegal purposes. Until 2021, Bitcoin was the primary cryptocurrency used by cybercriminals, but since then, its share in illegal transactions has been steadily declining.
In its place, stablecoins such as Tether are emerging, playing an increasingly significant role in both legal and illegal activities in the cryptocurrency market. The rise of stablecoins in illegal transactions underscores the need for ongoing vigilance and regulatory measures to address potential risks. It is important for authorities, market participants, and law enforcement agencies to remain proactive in identifying and minimizing illegal activities, while fostering innovation and development in the cryptocurrency sector.
The Chainalysis report provides valuable insights into the state of cryptocurrency transactions, revealing that the overwhelming majority occur within legal frameworks. The decline in illegal activities indicates progress in building a safer and more legally compliant cryptocurrency ecosystem. However, the report serves as a reminder that further efforts are needed to address potential risks and ensure responsible use of cryptocurrencies in an increasingly digital financial landscape.
