By Michael Scott
A recent risk management firm TRM Labs survey shows that fiat channels are preferred for criminal financing. The research shows that Bitcoin’s involvement as a conduit of illicit crypto activity is significantly declining.
Fiart Channels Considered a Haven for Criminal Financing
Contrary to the popularity of fiat channels for criminal financing, bad actors are losing interest in leveraging Bitcoin. The TRM Labs study shows fewer cybercriminals use Bitcoin to move illicit proceeds. Instead, most criminal actors are considering other cryptos or retreating to the fiat channels.
In its report released Wednesday, June 28, TRM Labs shows the illicit finance volumes that feature Bitcoin are declining sharply. The Illicit Crypto Ecosystem Report report shows that Bitcoin-based transactions executed by bad actors have plunged to their lowest levels in 7 years.
TRM Labs observed that the transition to a newly discovered multichain era is causing the qualitative leap realized from Bitcoin involvement as the primary channel to move criminal proceeds. The default mechanism for criminal money movements remains cash and variants of fiat-affiliated finance.
Hawala Gains Dominance as Crypto Industry Suffers $2 billion Loss
TRM survey discovered the preference for cash or order alternatives of finance. The firm observed that hawala is gaining dominance, considering that an individual transfers money without corresponding physical movement. Its ease makes it the mode of choice to finance illicit activity and launder proceeds.
TRM Labs disclosed that though illicit activity involving digital assets is rising, the cryptocurrency did not invent criminal forms. The firm illustrated that the crypto industry suffered a $2 billion loss, primarily stolen via attacks that targeted cross-chain bridges. Bitcoin accounted for an insignificant amount of the loss.
Bitcoin Involvement in Illicit Financing Slips Below 20%
The report notes that the emergence of the multichain era has widespread ramifications for distributing illicit crypto. The study demonstrated that Bitcoin’s share of facilitating illicit transactions plunged from 97% in 2016 to account for 19% in 2022.
TRM Labs survey showed that Bitcoin involvement in crypto hack volume nosedived from two-thirds in 2016 to slightly under 3% by 2022. The void left by Bitcoin involvement appears filled by Ethereum at 68%, with BNB Smart Chain at 19%.
TRM Labs claims that its research revealed the transformation of Bitcoin from an exclusive currency facilitating terrorist financing in 2016. A review of the 2022 cases shows Tron accounts for 92% of terrorist funding, thereby replacing Bitcoin.
A recent trend reveals a 240% increment in Tether (USDT) utilization in terror financing organizations in 2022. Its sharp increase arises from USDT emerging as the dominant stablecoin in settling payments.
TRM Labs holds that the lower involvement of Bitcoin in illicit finance sheds brighter news for the leading crypto by market capitalization. The decline coincides with Bitcoin adoption by institutional investors on the rise.
Pyramid and Ponzi Schemes Drain Billions of Crypto
The TRM Labs report estimates that over $7.8 billion worth of crypto was lost in the pyramid and Ponzi schemes. Further scrutiny shows that $1.5 billion was incurred on darknet markets involved in narcotics. Criminals who orchestrated DeFi hacks stole $3.7 billion during exploits executed in 2022.
A previous publication by analytics firm Chainalysis illustrated that illicit crypto transactions were the highest in 2022. The firm reported that crypto value exceeding $20 billion was remitted to addresses involved in illegal activities in 2022.
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