Chainalysis reported a significant drop in cryptocurrency money laundering last year, attributing it to reduced trading volume and the adoption of evasion strategies by sophisticated threat actors like the Lazarus Group.
Money laundering with cryptocurrency: 2023
According to Chainalysis, down from $31.5 billion the previous year, $22.2 billion was laundered using cryptocurrency in 2023. Some of this decline could be explained by a general decline in the volume of crypto transactions, both legal and illegal.
However, compared to the 14.9% decline in overall transaction volume, the decline in money laundering activity was more pronounced, at 29.5%. For the last five years, funds transmitted from unlawful addresses have mostly ended up at centralized exchanges. This is a reasonably constant trend.
When it came to the distribution of money laundering service types, 2023 was mostly similar to 2022. However, there was a minor decline in the percentage of illicit funds that went toward these sorts of services and an increase in funds that went toward gambling and bridge protocols.
According to the analysis, there has been an increase in the proportion of illicit funds allocated to decentralized finance (DeFi) protocols. The report also said, “DeFi’s inherent transparency generally makes it a poor choice for obfuscating the movement of funds.”
Concentration of money laundering at fiat off-ramps
The research also stated that while there are hundreds of off-ramping services available, the majority of money laundering activities are focused on a small number of these firms. Just five services received 71.7% of all illicit funds supplied to off-ramping services in 2023, an increase from 68.7% in 2022.
According to Chainalysis, the threat actor Lazarus Group, based in North Korea, has been modifying its money laundering techniques to evade a similar outcome.
YoMix takes over for Sinbad
The hacking gang has been using a range of protocols, such as cross-chain bridges and mixers like YoMix, to hide their activities and avoid being discovered. Funds transferred to mixers from illegitimate addresses decreased overall in 2023, from $1.0 billion in 2022 to $504.3 million.
said, “The growth of YoMix and its embrace by Lazarus Group is a prime example of sophisticated actors’ ability to adapt and find replacement obfuscation services when previously popular ones are shut down.”
Chainalysis said, that a large portion of this is probably because of regulatory and law enforcement actions, like the closure and sanctioning of mixer Sinbad in November 2023.”
The U.S. Treasury sanctioned it due to allegations that the cryptocurrency mixer Sinbad had connections to a North Korean hacker group. As a result, the FBI, Dutch, and Finnish authorities confiscated its website.
Cross-chain bridges usage
There was a significant increase in 2023 in the usage of bridge protocols by illegal actors, particularly cryptocurrency thieves, for the aim of money laundering. In total, illegitimate addresses sent bridge protocols $743.8 million in cryptocurrency in 2023, up from just $312.2 million in 2022.
Also Read: Senators Spar Over Crypto’s Role in Money Laundering
