The illicit cryptocurrency market has reached unprecedented heights, with reports indicating transactions valued at $40 billion occurring throughout 2024. According to data from Chainalysis, the total volume of illicit cryptocurrencies may rise to approximately $51 billion once all criminal activities are fully accounted for. This burgeoning figure serves as a stark reminder of the shifting dynamics within the cryptocurrency ecosystem, with users pivoting away from traditional Bitcoin (BTC) to more stable alternatives.
Chainalysis, known for its blockchain analysis, unveiled these findings amid growing institutional adoption of cryptocurrencies, which has often been overshadowed by the spotlight on criminal activities. The significance of illicit transactions was underscored as they accounted for just 0.14% of all cryptocurrency transactions, markedly lower than the 0.61% recorded the previous year. Such data rise alarms as they reflect criminals' growing reliance on stablecoins—which now make up 63% of all illicit transactions, leaving Bitcoin's share down to around 20%. Interestingly, privacy coin Monero (XMR) is reported to play its role within the dark web, showing notable presence among illicit exchanges.
The shift toward stablecoins highlights not just the changing preferences of crypto criminals but also the complexity of tracking illegal activities conducted on blockchain networks. The Chainalysis report suggested various illicit activities primarily included scams, malware, fraud, and operations involving the dark net.
One of the most significant events related to this climate of illicit activity occurred on February 21, 2025, when Bybit, a cryptocurrency exchange, fell victim to the largest hack of its kind, reportedly losing about $1.46 billion worth of Ethereum (ETH) and several other assets. FBI investigations linked the breach to the Lazarus Group, identified as North Korean hackers known for targeting cryptocurrency services to fund regime activities.
Following the hack, the Lazarus Group sought to launder the stolen funds through various platforms, including Thorchain, which had recently seen increased trading volume. Analysts like Yu Jin found the network's average trading volume surged from approximately $80 million daily to approximately $580 million as the laundering kicked off, raising several concerns about the platform's ability to withstand such criminal activities.
The aftermath of the Bybit hack saw other cryptocurrency exchanges rallying to support Bybit. CEO Ben Zhou provided transparency about the situation, reassuring users about their fund security even as withdrawal operations faced congestion. Notably, exchanges like Binance extended support, lending funds back to Bybit.
Thorchain's community responded to the illicit activities by implementing measures aimed at integrating more rigorous screening services for crypto funds via partners like Eliptic, indicating hopes to avert future incidents of this magnitude. Pluto, one of Thorchain’s developers, emphasized collaboration as key to ensuring compliance without risking the underlying network's operational integrity, stating, “Everyone must work together to make the best effort to stop these flows to the best of our abilities without compromising the integrity of L1.”
Despite the efforts from various stakeholders within the cryptocurrency industry, reports suggested the hackers still hold significant amounts of stolen ETH, far exceeding even prominent industry figures like Ethereum co-founder Vitalik Buterin. The dynamic nature of cryptocurrency theft and the subsequent laundering practices challenge the efforts of law enforcement and policymakers alike.
Chainalysis revealed it had seized around $40 million of the stolen funds, with various coordinated efforts leading to the freezing of $42.85 million more. Working with government authorities, Bybit continues strengthening its efforts toward fund recovery and confronting these cybercriminals, and as it does so, the cryptocurrency ecosystem must also grapple with the reality of these illicit operations.
Going forward, the industry may need to adapt more stringent regulations and security measures, especially as innovations like Bitcoin ETFs attract institutional investors. The issue of illicit use of cryptocurrencies poses questions about their long-term integrity and how they can operate within regulatory frameworks.
For now, the line between legitimate and illicit use remains murky, reflecting the challenges faced by the crypto space. While 2024 may mark the year of record illicit volumes, it also demonstrates the necessity for vigilance, collaboration, and innovation to secure the future of cryptocurrencies.