Dark market crypto-crime to increase by 2023, $1.7B in revenue – Chainalysis

The crypto industry continues to suffer from cybercrime, with the dark market one of the two categories expected to see revenue growth in 2023, according to a recent report by blockchain analysis firm Chinalysis.

In the year Chainalysis' “2024 Crypto Crime Report,” released on February 29, shows that dark markets generated at least $1.7 billion in revenue by 2023 — updated data from 2022, when authorities shut down Hydra, the world's largest dark market.

While no single marketplace will replace Hydra, the report shows that smaller marketplaces are thriving by serving niches and developing more “specialized roles.” Chainalysis has revealed that the mega darknet market is leading the pack with over $500 billion in crypto revenues.

However, revenue from dark markets has yet to return to the highs seen during the Hydra era. The report said.

“We look forward to law enforcement agencies continuing to investigate and crack down on cannabis markets, especially those that offer fentanyl products for sale.”

Eric Jardine, head of cybercrime research at Chainalysis, told Cointelegraph that competing for market share by “niche darknet marketplaces” is nothing new and follows trends since the shutdown of darknet marketplaces like Silk Road and Alphabay.

In addition to the increase in dark market revenue, 2023 saw more than a doubling of crypto-related sanctions by the United States Office of Foreign Assets Control (OFAC), with a total of 18 sanctions against individuals or entities, all of which include cryptographic addresses in their names. .

Crypto-sanctioned entities and jurisdictions account for 61.5% of all illicit transaction volume, with a transaction volume of $14.9 billion by 2023.

According to the report, by 2023, crypto-related OFAC sanctions will shift to groups and individual actors and away from darknet markets like Guaranteex and Hydra, as well as mixers like Tornado Cash.

The list of crypto-related sanctioned individuals includes North Korean hacking group Kimsuky, crypto mixer Sinbad.io, Russian national Ekaterina Zhdanova and Gaza-based MSB Cash.

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However, the report presented some more positive figures, including a year-over-year decline in revenue from crypto-based scams. Although scams are one of the main drivers of crypto-based crime, with revenues expected to reach $4.6 billion by 2023, the figure is down from $5.9 billion last year.

However, in These types of scams have more than doubled in revenue year over year, with data showing an 85x growth since 2020.

The Chainalysis report estimates that dating scams have the “worst impact on victims of all fraud types” due to average payouts. According to the report, 2023 Approved Phishing scams are increasing in popularity.

Jardine says romance scams are on the rise because “they're effective — scammers are nothing if not opportunistic.” He added:

These scams take weeks or months as the scammers seek to gain the trust of their victims. Users who don't know the signs to spot a scam can easily fall for it.

When asked about any insights that will help users avoid fraud and crypto-related cybercrime in 2024, Jardine said:

Creating a safer and more secure environment on the supply chain requires action by various public and private sector actors as well as individuals.

Regarding scams, “individuals can help reduce their risk by being proactive in their on-chain and online interactions,” he said, while other ecosystem actors can help fraud networks and law enforcement identify traces on the chain. “It can work with all regions and private sector actors to recover money stolen from victims.”

Jardine emphasized the importance of using services that actively promote security in the decentralized financial space. “Good digital hygiene, especially when it comes to password and genealogy management, is also critical,” he said.

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