Cyber criminals are ditching Bitcoin for stablecoins

Cyber criminals are ditching Bitcoin for stablecoins
Bitcoin is no longer the only game in town for bad actors, according to Chainalysis. Credit: Andrés Núñez
  • Total value received on-chain from illicit entities fell 38% year-over-year in 2023.
  • Data suggests bad actors are trending away from Bitcoin into stablecoins.

The landscape of crypto crime is transforming — stablecoins have overtaken Bitcoin as the preferred method for illicit transactions.

The shift poses new challenges for regulators and law enforcement in the year ahead, according to blockchain analytics firm Chainalysis.

Stablecoin use in illicit transactions has grown over the past two years, the firm’s latest Crypto Crime Trends report said. It now accounts for roughly 60%.

By comparison, Bitcoin’s share has fallen to around 23% down from 53% in 2021.

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Bitcoin remains the preferred choice for illicit activity on the dark net as well as for use in ransomware extortions. Stablecoins are relatively more linked to scams and illicit transaction activity from sanctioned entities.

Unlike Bitcoin, stablecoin issuers can freeze funds when they become aware something is wrong. In October, Tether said it froze $873,000 across 32 separate blockchain addresses connected to terrorism and conflict-related activity in Israel and Ukraine.

Chainalysis estimates revenue from scams and hacks eased off last year. It dropped over 29% and 54%, respectively, over the past 12 months.

Increasing activity

Bad actors, including those operating in sanctioned regions or associated with terrorism financing, are increasingly incentivised to utilise stablecoins, Chainalysis said.

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These groups often face hurdles accessing the US dollar via conventional channels. Now they can leverage the stability offered by the US dollar and digital assets backed by it.

“Through 2021, Bitcoin reigned supreme as the cryptocurrency of choice among cybercriminals, likely due to its high liquidity,” Chainalysis said.

That’s changed over the last two years, the firm added, “with stablecoins now accounting for the majority of all illicit transaction volume.”

The trend also coincides with an increase in stablecoins’ usage in all cryptocurrency transactions, encompassing both legitimate and illicit activities.

It’s important to note that stablecoins do not dominate every type of crypto-related crime, Chainalysis wrote.

Last year, illicit crypto addressed witnessed a more than $15 billion decline in value received on-chain, down from almost $40 billion in 2022,Chainalysis revealed.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.