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Cryptocurrency-enabled money laundering soared to $22.2 billion in 2023 – Report


A study conducted by the blockchain research platform Chainalysis unveiled that a sum of $22.2 billion was laundered worldwide through various cryptocurrency exchanges in 2023.

Nevertheless, the report highlighted a noteworthy decline from the $31.5 billion laundered via digital currency in 2022.

As per the report, this decrease could be linked to an overall reduction in cryptocurrency transaction volume, encompassing both lawful and illicit activities.

Numerous industry pundits have contended that the anonymity inherent in blockchain transactions renders it a potent instrument for money laundering. Consequently, stakeholders in Nigeria have persistently advocated for cryptocurrency regulation.

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Destination of the money

The report by Chainalysis highlighted that centralized exchanges have consistently served as the primary destination for funds transferred from illicit sources over the past five years.

“Over time, the role of illicit services has diminished, while the proportion of illicit funds directed towards DeFi (Decentralized Finance) protocols has increased. This shift is primarily attributed to the overall expansion of DeFi during this period. However, it’s important to note that DeFi’s inherent transparency often limits its effectiveness in obscuring fund movements,” the report stated.

In terms of the breakdown of service types used for money laundering, 2023 closely resembled 2022. However, there was a slight decrease in the portion of illicit funds directed towards illicit service types, alongside an uptick in funds flowing into gambling services and bridge protocols.

“Upon closer examination of how specific types of crypto criminals laundered money, significant changes were evident. Particularly noteworthy was the substantial surge in the volume of funds routed to cross-chain bridges from addresses associated with stolen funds. Additionally, there was a notable increase in funds originating from ransomware directed towards gambling platforms and bridges,” the report further detailed.

Deposit addresses

Analyzing the concentration of money laundering activity at the deposit address level (which are addresses associated with individual users on centralized services, akin to bank accounts), Chainalysis revealed that 109 exchange deposit addresses received more than $10 million worth of illicit cryptocurrency each, totaling $3.4 billion collectively in 2023.

“While this still signifies significant concentration, in 2022, only 40 addresses received over $10 million in illicit crypto, amounting to just under $2.0 billion in total,” the report noted.

“In 2022, merely 542 deposit addresses received over $1 million in illicit cryptocurrency, totaling $6.3 billion, which represented over half of all illicit value received by centralized exchanges that year.

“In contrast, in 2023, 1,425 deposit addresses received over $1 million in illicit cryptocurrency, summing up to $6.7 billion, accounting for just 46% of all illicit value received by exchanges throughout the year,” it elaborated.

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