It seems that traditional fiat channels continue to reign supreme for illicit funding, with Bitcoin gradually losing its appeal among criminals within the cryptocurrency space.
New insights suggest a decline in the preference for Bitcoin among cybercriminals seeking to move unlawful funds. A recent trend points towards these individuals reverting to traditional fiat channels or exploring alternative cryptocurrencies.
TRM Labs, a firm specializing in risk management and compliance within the digital asset space, unveiled data indicating a significant drop in Bitcoin-related illicit financial activities over the past seven years. This insight is based on their “Illicit Crypto Ecosystem Report,” shared with the public on June 28.
According to TRM Labs, the advent of a new multi-chain era has catalyzed a shift away from Bitcoin as the principal conduit for the transfer of unlawful profits. The study emphasized that cash and other fiat-based financial methods continue to be the primary choice for illicit monetary transactions.
The report underscored that, while cryptocurrency-related illicit activities have surged, it’s essential to remember that these forms of crime were not created by cryptocurrencies.
In 2022, an estimated $2 billion in cryptocurrencies was lost in cross-chain bridge attacks, but only a negligible portion was in Bitcoin. TRM Labs’ report suggests that this new multi-chain era has drastically affected the spread of unlawful crypto volumes. Bitcoin’s contribution to illicit transactions reportedly fell from 97% in 2016 to a mere 19% in 2022.
Further data shows that in 2016, Bitcoin accounted for two-thirds of all crypto-related hacks, but by 2022, this figure had fallen to less than 3%. Ethereum (68%) and BNB Smart Chain (19%) picked up the slack, according to the report.
The report also highlights a shift in the cryptocurrency of choice for terrorist financing. While Bitcoin was once the go-to currency for such activities, by 2022 it had been almost entirely supplanted by Tron, accounting for 92% of transactions, as per TRM Labs.
Additionally, the firm reported a 240% increase in the use of Tether USDT among the terror financing entities it monitored in 2022.
This shift away from Bitcoin for illicit activities could be a silver lining for the cryptocurrency, potentially making it more appealing for institutional adoption.
Nevertheless, the cryptocurrency was implicated in significant illegal activities in 2022, with at least $7.8 billion funneled into Ponzi and pyramid schemes, $1.5 billion expended on narcotics-focused darknet markets, and $3.7 billion purloined through DeFi hacks and exploits, as reported by TRM Labs.
Earlier in the year, reports highlighted that 2022 broke new ground in terms of illicit cryptocurrency transactions. Illicit addresses received cryptocurrencies worth over $20 billion last year, as noted by analytics firm Chainalysis.