The cryptocurrency industry remains an attractive target for cybercrime. Chainalysis’ “The 2024 Crypto Crime Report” shows a decline in cryptocurrency-related criminal activity. The amount of digital assets received at illegal addresses fell to $24.2 billion last year, compared to $39.6 billion recorded in 2022. However, not everything is as good as it seems at first glance. Analysts’ data indicate the growth of darknet market revenues and frauds related to novels. We will discuss this and other highlights of the report in today’s article.
The Growth Of Darknet Market
Profits earned through darknet marketplaces totaled at least $1.7 billion in 2023, up from 2022, when the government shut down the world’s largest darknet marketplace, Hydra. While no marketplace has yet taken Hydra’s place, the report found that smaller markets are thriving by serving specific niches and developing more “specialized areas.”
Analysts note that the Mega Darknet market is leading the way with cryptocurrency inflows of more than $500 billion. However, the revenues generated by darknet markets have not yet returned to the peak levels seen in the Hydra era.
“We expect law enforcement agencies to continue to investigate and dismantle darknet markets, especially given that many offer fentanyl products for sale.” the report notes.
Funding of Criminal Organizations
Chainalysis analysts note that assessing terrorist financing is extremely important, but also challenging. The use of cryptocurrencies by criminal organizations accounts for a small share of illegal transactions, but this issue is a constant concern.
The ability to trace transactions makes cryptocurrencies a less favorable tool for financing the activities of illegal groups.
A comprehensive approach that includes not only intelligence, but also regulatory and ethical considerations, as well as factual accuracy and due diligence, is essential. Cryptocurrency exchanges also play an important role in this regard. They have a strict anti-money laundering policy and actively comply with the requirements of the Financial Action Task Force on Money Laundering (FATF).
The report also describes how terrorist organizations use cryptocurrency transactions. It notes that financial companies have become key intermediaries for illegal cryptocurrency transactions for groups such as Hezbollah.
“Government agencies with access to off-chain intelligence are more likely to detect these activities, and can leverage blockchain analysis tools to further investigate these financial flows,” wrote Chainalysis.
Scale of Crypto-Romance Fraud
The report says that income from thefts decreased by 29.2%, but fraud tactics related to romantic relationships are becoming more common.
“This is especially concerning when we factor in that romance scams have the worst impact on victims of all scam types, based on average payment size,” Chainalysis wrote.
The company’s data shows that the average payout in romance scams was $4,593. Given that victims often make multiple payments to the same address, the average loss per victim is usually much higher.
Artificial Intelligence As a New Tool For Crypto Fraud
According to Cryptonews, Eric Jardine, head of cybercrime research at Chainalysis, summarized the growth and decline of illegal blockchain activity in 2023 and predicted what tactics criminals will use next.
He noted that discussions are already underway on how new technologies can affect cryptocurrency crime, especially large language models (LLMs).
Artificial intelligence could have threatening implications for romance fraud, also known as “pig butchering” scams. They start with seemingly innocent contacts that then develop into a fabricated relationship that the fraudster uses to gain financial gain.
While artificial intelligence benefits the crypto industry, it can also be a dangerous tool. Romantic fraud is not the only thing that AI can threaten. There have already been cases when documents created by artificial intelligence bypassed KYC checks. Such situations not only cause security problems but also create new “opportunities” for fraudsters.
Moreover, the creation of deepfakes by artificial intelligence has long been a serious problem. There have been numerous cases when thieves used deepfakes to steal user funds. Therefore, even with all the advantages of integrating AI and blockchain, one should be vigilant and not forget about the downside.
Summary
Even though the Chainalysis report showed a decrease in criminal activity, the situation is still not safe. After all, despite the decline, revenues from darknet and romance fraud continue to flourish. In addition, a new danger for cryptocurrency users is the growing threat from artificial intelligence. Despite the positive developments in reducing cryptocurrency crime, a number of problems and threats still remain relevant to the industry.