Tether and Tron continue to dominate criminal financing as overall illicit funding decreases, according to new TRM Labs Report

Illegal lending in cryptocurrencies decreased in 2023, according to a new report. Photo illustration: Josue Evilla — Fortune.Original photo from Getty Images

Proof of State is Fortune Crypto’s Wednesday edition, where Leo Schwartz provides insider insight into policy and regulation.

Yesterday felt like a nostalgic return to a pre-Bitcoin ETF era, with law enforcement actions and hacks dominating the headlines. The Justice Department’s indictment against KuCoin for allegedly processing $9 billion in suspicious transactions may have been the biggest story, but the rapid collapse and miraculous recovery of a blockchain-based game called Munchery has been rather It felt like a blast from the past (no pun intended).

Residents of cryptocurrencies have long warned The fraudulent nature of the Layer 2 blockchain Blast is well known, but yesterday’s hack marks the first major incident after rogue developers and North Korean cybercriminals exploited the blockchain. did. elaborate gameplay Earn “Schnibbles” to feed “Munchers” and earn “Blast Points”.Laugh all you want, but hackers are pouring money into your app. Swipe $63 million before the funds were recovered.

The immediate outcome is yet another blow to cryptocurrencies’ attempts to position themselves as a serious industry.like below contemptuous While $60 million in schnibbles have been stolen in the wake of political meme coins that have risen to the mainstream in the past few months, blockchain proponents will have a hard time selling their industry to traditional finance. .

A more existential threat is the inability of cryptocurrencies to provide effective safeguards, particularly with respect to illicit funds that fund rogue states’ nuclear programs and fentanyl production. As Ryan Serkis, one of the loudest boosters in the industry, Posted Last night on X, “If the hacked funds reach another $62 million, [North Korea] (or allegedly went to NK), it’s dawn for US cryptocurrencies.”

new report The report, published this morning by blockchain analysis firm TRM Labs, appears to have allayed concerns, at least slightly. The volume of illicit funds fell by a third last year, from $49.5 billion in 2022 to about $35 billion in 2023, according to the report. Additionally, the decline in illegal transactions exceeded the overall decline, even though the price and trading volume of cryptocurrencies plummeted during the same period. The amount he decreased by 10%. This means that other factors are at play.

As government agencies such as the Department of Justice and the Treasury Department scrutinize the cryptocurrency industry, figures such as Deputy Treasury Secretary Wally Adeyemo are investigating the harmful effects of crypto-based illicit finance, from hacking and fraud to drug trafficking. It is appealing to the industry to address the issue. A cyber group that collaborates with the nation. TRM Labs’ latest numbers suggest its efforts are starting to have an effect, but the company attributes the decline primarily to government actions such as more aggressive law enforcement and sanctions. I believe. Still, the cryptocurrency industry has played a key role in increasing its focus on enforcement activities, such as providing blockchain analysis and coordinating with authorities to seize accounts.

The report is not completely rosy. Based on past conclusions, TRM Labs believes that stablecoin tethers continue to dominate terrorist financing, particularly on the blockchain Tron, and that unique Tron addresses that have received tethers associated with terrorist financing campaigns found that the number has increased by 125% in the last year. Overall, TRM Labs finds that Tron will host 45% of all illicit volumes in 2023, up from 41% in 2022, with Ethereum at 24% and Bitcoin at just 18%. discovered.

Additionally, drug sales on darknet markets increased from $1.3 billion in 2022 to $1.6 billion in 2023, while other categories of crypto-based illicit financing declined. According to TRM Labs, drug sales using Tron have more than quadrupled. Cybercriminals prefer blockchain because of the outdated perception that gas prices are relatively low, price fluctuations are minimal, and it is difficult to track.

Law enforcement officials once feared the threat of privacy coins like Monero, but as Bitcoin has lost its luster as a crime arena, Tron appears to have become a new area for illegal activity. Things already seem to be changing in blockchain with big players like Binance and Circle. rethink Relationship with the project founded by Justin Sun. But Tether is still going strong. Nearly $55 billion, more than half of Tether’s total market capitalization, issued On Tron.

leo schwartz

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3 blockchain bases artificial intelligence Companies are in talks to integrate their crypto tokens and develop a decentralized AI platform. (bloomberg)

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short seller We do not expect the current rise in crypto prices to continue, and pledges for crypto stocks have increased to nearly $11 billion. (Yahoo Finance)

distributed cloud computing company hive Raised $13 million in Series A standard charterventure arm. (luck)


The Department of Justice removed KuCoin, but at least the CFTC may not consider Litecoin to be a security.

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