According to recent findings from blockchain research firm Chainalysis, cryptocurrency money laundering activities experienced a significant downturn in 2023, dropping by 29% compared to the previous year.
In the report released on Thursday illicit funds laundered through cryptocurrency exchanges plummeted from $31.5 billion in 2022 to $22.2 billion in 2023.
Chainalysis attributed this decline to a general reduction in both legitimate and illicit crypto transaction volumes throughout the year.
The research platform highlighted that centralized exchanges remained the primary destination for funds originating from illicit sources, a trend that has persisted over the past five years.
However, there was a notable shift in the distribution of illicit funds, with an increasing proportion flowing into decentralized finance (DeFi) protocols.
The report suggested that this shift was influenced by the transparency inherent in DeFi platforms, making them less favorable for concealing the movement of funds compared to traditional exchanges.
Furthermore, Chainalysis noted changes in the methods used for laundering illicit cryptocurrency.
The report observed a significant rise in funds being channeled through cross-chain bridges from addresses associated with stolen funds.
Also, there was a notable increase in funds originating from ransomware attacks being directed towards gambling platforms and bridge protocols.
In terms of concentration, the report highlighted that 109 exchange deposit addresses received over $10 million worth of illicit cryptocurrency each, collectively receiving $3.4 billion in illicit funds in 2023.
This represents a considerable increase compared to 2022 when only 40 addresses received similar amounts.
The findings underscore evolving trends in cryptocurrency laundering and signal a growing sophistication in illicit financial activities within the digital asset space.
Regulatory bodies and law enforcement agencies continue to grapple with emerging challenges posed by crypto-related crimes as the landscape evolves.