The money laundered through cryptocurrency exchanges declined by 29 per cent in 2023.
This is according to a blockchain research platform, Chainalysis report obtained on Thursday, revealing that those illicit funds dropped by approximately $9.3bn, declining from $31.5bn in 2022 to $22.2bn in 2023.
An overall decrease in crypto transaction volume, both legitimate and illicit, could be attributed to the drop, Chainalysis said.
For the past five years, centralised exchanges have been the primary destination for funds sent from illicit addresses, but this trend has remained relatively stable.
“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 period, but must also note that DeFi’s inherent transparency generally makes it a poor choice for obfuscating the movement of funds,” it said.
Regarding the breakdown of money laundering services in 2023, the firm noted that the trend closely resembled that of 2022.
It, however, noted that illicit funds were directed towards illicit services, with a slight decrease accompanied by an increase in funds moving to gambling services and bridge protocol.
“If we zoom in to look at how specific types of crypto criminals laundered money, we can see that there was 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.
Further, Chainalysis said 109 exchange deposit addresses received over $10m worth of illicit cryptocurrency each, and collectively, they received $3.4bn in illicit cryptocurrency in 2023.
“While that still represents significant concentration, in 2022, only 40 addresses received over $10m in illicit crypto, for a collective total of just under $2.0bn.
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