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61.5% of Illegal Crypto Deals Linked to Terrorism and Sanctions Violations

Last Updated March 1, 2024 10:26 AM
James Morales
Last Updated March 1, 2024 10:26 AM
By James Morales
Verified by Peter Henn

Key Takeaways

  • A report by Chainalysis identified sanctions violations as the most significant category of crypto crime in 2024.
  • Out of $24.2 billion in illicit crypto transactions, $14.9 billion involved sanctioned entities.
  • Overall, however, crypto crime declined last year.

In 2023, sanctions breaches accounted for the majority of all illicit crypto transactions.

Out of $24.2 billion of illicit crypto transactions in Chainalysis’ 2024 Crypto Crime Report , $14.9 billion involved sanctioned entities, including terrorist organizations and cryptocurrency services located in sanctioned jurisdictions.

Crypto Sanctions Violations Surge

In total, the report found that sanctions violations made up 61.5% of all illicit crypto transactions last year, up from just 43% in 2022.

The increase came after the United States Office of Foreign Assets Control (OFAC) more than doubled the number of entities on its crypto sanctions list. The authority issued 18 new sanctions that included cryptocurrency addresses. 

Of these, foreign persons involved in the global drug trade made up the largest group, followed by malicious cyber threat actors and global terrorist networks.

Meanwhile, Chainalysis identified two services that were responsible for a significant part of the increased volume: Tornado Cash and Garantex.

Tornado Cash and Garantex Drive Illicit Transactions

First sanctioned by the US Treasury in August 2022, Tornado Cash inflows initially dropped by as much as 93%. However, Chainalysis noted that the crypto mixer made something of a comeback last year. It also said Tornado Cash received $822 million worth of crypto since it was added to OFAC’s list. 

Tornado Cash inflows
Tornado Cash inflows. Source: Chainalysis.

Although Tornado’s overall transaction volume remains lower than it was pre-sanctioning, the report notes that it is “still worth watching,” considering usage has been trending upward since early 2023.

Alongside Tornado, the study highlighted the impact of sanctions against Garantax, a Russian crypto exchange that was sanctioned  by OFAC in 2023 for enabling darknet markets and ransomware operations.

What Makes an “Illicit” Transaction?

Ultimately, both Tornado and Garantax have their supporters.

For instance, privacy advocates have rallied around the Tornado Cash founder Roman Storm since his arrest last year.

Meanwhile, Chainalysis acknowledged that ordinary Russian crypto users will likely account for a lot of Garantax’s transaction volume. Given the sweeping nature of sanctions against Iran and North Korea, otherwise innocuous transactions in those countries will also have been classified as “illicit” by the study’s methodology.

Despite the increase in sanctions-related transactions, the data suggests crypto crime dropped in 2023. From $39.6 billion in 2022, illicit transaction volumes fell to $24.2 billion. As well as dropping in real terms, illicit activity also fell as a share of all cryptocurrency transactions. It ended up representing just 0.34% of the global total.

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