Illegal Crypto Transactions Drop 20% Amid Rising Cybercrime Concerns

The value of illegal transactions in the cryptocurrency sector has seen a notable decline of approximately 20% in the first half of 2024, despite an alarming rise in stolen funds and ransomware attacks, according to a report by blockchain analytics firm Chainalysis.

The report, which offers a mid-year review of the state of the cryptocurrency industry, revealed that illicit transactions totaled $16.7 billion during the first six months of the year, down from $20.9 billion in the same period last year. This decline suggests that legitimate activities within the sector are expanding at a faster rate than illegal ones, a positive sign for the broader adoption of cryptocurrencies globally.

“So far this year, inflows to legitimate services are the highest they’ve been since 2021, the previous bull market peak. This encouraging sign points to the continued adoption of crypto globally,” the analysts at Chainalysis noted in the study.

However, this positive trend is tempered by the nearly doubled flow of stolen funds, which surged to $1.58 billion from $857 million in the same period last year. Moreover, ransomware inflows saw a slight increase, rising by about 2% to $459.8 million from $449.1 million. These figures underscore the persistent and evolving threat that cybercriminals pose to the cryptocurrency industry.

The cryptocurrency sector has been grappling with a series of challenges, particularly in the realm of regulation, as governments and financial authorities worldwide strive to establish control over the rapidly evolving industry. The year 2022 marked a particularly tumultuous period in the history of cryptocurrencies, witnessing the collapse of several major companies, including Celsius Network, Three Arrows Capital, and the infamous FTX, led by Sam Bankman-Fried.

“With any new technology, adoption will grow among both good and bad actors. And while illicit activity is down year-to-date compared to previous years, crypto inflows to specific cybercrime-related entities show some worrying trends,” the Chainalysis report stated.

The report also highlighted a concerning trend in ransomware attacks, predicting that 2024 could potentially be the highest-grossing year for ransomware. Last year already set a grim record, with over $1 billion paid out in ransomware attacks. The first half of 2024 has already seen ransomware payments surpass $460 million, positioning this year as potentially the worst on record for such cybercrimes.

Ransomware attacks have not only increased in frequency but have also become more severe, with the maximum ransom payment recorded this year reaching approximately $75 million, paid to a group known as Dark Angels. This represents a staggering 96% increase from last year’s maximum payment and a 335% increase from 2022. The report also noted a troubling rise in the median ransom payment, indicating that the average severity of these attacks is also growing.

“The rapidly increasing maximum payment amount is discouraging, and it is doubly so when this trend in outlier values is mirrored by a growing trend in the median payment. This trend is especially common among the most-damaging ransomware events,” the report added.

The average amount of cryptocurrency stolen per heist in 2024 has jumped by about 80%, a sharp contrast to the 50% decline recorded last year. This increase is partly attributed to the rise in the price of Bitcoin, which accounted for roughly 40% of the total transaction volume associated with these thefts. Bitcoin, the world’s largest cryptocurrency, soared to a record high of approximately $74,000 in March, a 67% increase from the beginning of the year. However, it has since retreated, trading at around $59,200 as of Saturday, according to data from CoinMarketCap.

Chainalysis also observed a resurgence in hacking activity, with criminals increasingly targeting centralized exchanges rather than decentralized finance (DeFi) protocols. “This year has seen a resurgence of hacking activity. Comparing both amounts stolen and the number of hacking incidents year-on-year is telling,” the report said.

While DeFi services were the primary targets in 2022, attackers seem to have shifted their focus back to more vulnerable, centralized exchanges, following significant security investments by these platforms.

As the cryptocurrency industry continues to grow, the balance between fostering innovation and curbing criminal activities remains a critical challenge. The decline in illegal transactions is a step in the right direction, but the rise in more sophisticated cybercrimes underscores the ongoing need for vigilance and robust regulatory frameworks.