A report by blockchain research platform, Chainalysis, has revealed that a total of $22.2 billion was laundered globally through different cryptocurrency exchanges in 2023.
The report, however, indicated that this was a significant decrease from the $31.5 billion laundered through digital currency in 2022.
According to the report, the drop could be attributed to an overall decrease in crypto transaction volume, both legitimate and illicit.
Several industry experts have argued that the anonymity of trades on blockchain technology makes it a veritable tool for money laundering. This has led to repeated calls for crypto regulation in Nigeria by stakeholders.
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Destination of the funds
Chainalysis in the report noted that centralized exchanges have been the primary destination for funds sent from illicit addresses, at a rate that has remained relatively stable over the last five years.
- “Over time, the role of illicit services has shrunk, while the share of illicit funds going to DeFi protocols has grown.
- “We attribute this primarily to the overall growth of DeFi generally during the time period, but must also note that DeFi’s inherent transparency generally makes it a poor choice for obfuscating the movement of funds,” it said.
The company observed that 2023 mostly resembled 2022 in terms of the breakdown of service types used for money laundering, but saw a slight decrease in the share of illicit funds moving to illicit service types, and an increase in funds moving to gambling services and bridge protocols.
- “If we zoom in to look at how specific types of crypto criminals laundered money, we can see that there was in fact a significant change in some areas. Most notably, we saw a huge increase in the volume of funds sent to cross-chain bridges from addresses associated with stolen funds.
- “We also observed a substantial increase in funds sent from ransomware to gambling platforms, and in funds sent to bridges from ransomware wallets,” it added.
Deposit addresses
Examining the money laundering concentration at the deposit address level (deposit addresses are addresses at centralized services associated with individual users —akin to bank accounts) Chainalysis said 109 exchange deposit addresses received over $10 million worth of illicit cryptocurrency each, and collectively, they received $3.4 billion in illicit cryptocurrency in 2023.
- “While that still represents significant concentration, in 2022, only 40 addresses received over $10 million in illicit crypto, for a collective total of just under $2.0 billion.
- “In 2022, just 542 deposit addresses received over $1 million in illicit cryptocurrency, for a total of $6.3 billion, which was over half of all illicit value received by centralized exchanges that year.
- “In 2023, 1,425 deposit addresses received over $1 million in illicit cryptocurrency, for a total of $6.7 billion, which accounts for just 46% of all illicit value received by exchanges for the year,” it said.