2024 Encryption Crime Yearbook: Fraudulent Activities Emerge Continuously, Black and Gray Industry Transaction Scale Remains Unchanged

The year 2024 is a milestone year for the Web3 industry. The market capitalization of Crypto and the adoption of industry infrastructure have reached unprecedented heights. At the same time, the criminal industry has increasingly begun to utilize Crypto infrastructure to optimize its operations or create new paradigms of crime. This report provides statistics and disclosures on the scale of major types of encryption-related crimes and clarifies the impact of compliance facilities on the scale of the criminal industry, calling for the industry and government to pay attention to the harm caused by encryption-related crime.

Due to space constraints, this article only presents part of the conclusions and data from the report. You are welcome to visit the Bitrace official website to download the full version.

The situation of cryptocurrency crime remains severe.

High-risk addresses receiving stablecoin amounts

Considering that risky activities mainly occur on Ethereum and Tron networks, Bitrace defines the blockchain addresses of illegal entities used to receive, transfer, and store stablecoins (erc20_usdt, erc20_usdc, trc20_usdt, trc20_usdc) in these two networks as high-risk addresses. In the past year of 2024, the total receipt scale of such high-risk addresses reached $649 billion, slightly higher than the previous year.

The proportion of high-risk activities in the total trading volume of stablecoins

Calculated by trading volume, this part of high-risk activities accounted for 5.14% of the total trading activities of stablecoins that year, a decrease of 0.80% compared to 2023, but still significantly higher than in 2021 and 2022.

Classification of high-risk addresses receiving stablecoins

According to the type of stablecoin calculation, from 2021 to 2024, USDT in the TRON network accounted for the largest share. However, in 2024, the shares of USDT and USDC in the Ethereum network both increased.

The scale of online gambling continues to grow

The gambling platform charges the amount of stablecoins.

In 2024, the funding scale of online gambling platforms and the payment platforms providing deposit and withdrawal services for them will reach 217.8 billion USD, an increase of more than 17.50% compared to the scale in 2023.

Online gambling platforms charge stablecoin classification

Statistics on the classification of stablecoins used by online gambling platforms show that the share of USDC in 2024 has significantly increased to 13.36%, far exceeding the 5.22% of 2023. This indicates that as USDC's market capitalization rises, its adoption in the online gambling sector has also greatly improved, despite being issued and regulated by compliance entities.

The scale of black and gray market transactions remains unchanged.

The black and gray industry trading address receives the amount of stablecoins.

In 2024, the Ethereum and Tron networks received over $278.1 billion in funds related to black and gray market transactions, slightly higher than in 2023, while the transaction volume in these two years far exceeded that of 2021 and 2022.

Closely related to the development of the black and gray industries are cryptocurrency guarantee trading platforms, which can almost provide guarantee services for all links in the upstream and downstream of the black and gray industry, establishing trust among criminals.

Good Wang guarantees the collection of stablecoin quantity

The rise of Howang Guarantee and its competitors in Southeast Asia has coincided with the growing popularity of stablecoins in real economic activity in the region, a trend that is especially evident in 2024, when the scale of its business has expanded to $2.64 billion in the fourth quarter of that year.

encryption fraud has increased dramatically

Fraudulent address receives stablecoin amount

In 2024, there has been an explosion in the scale of stablecoin collection of blockchain addresses associated with fraudulent activity. Compared to 2021-2023, the scale of funding in that year has reached $52.5 billion, more than the sum of previous years.

However, this astonishing growth trend may not be entirely accurate, as the statistics are limited by the methods used by security vendors and the rising level of fraud by illegal entities. For example, as security vendors support many new public chains, more criminal incidents will be observed, which means that past incidents may not have been included in the statistics; incidents occurring within centralized institutions and those not actively disclosed by the victims cannot be included in the statistics either.

With the improvement of statistical methods and the increase in case disclosures, this batch of data will further grow in the investigation report for the next year.

The scale of money laundering begins to contract.

Money laundering address receives stablecoin amount

In 2024, blockchain addresses associated with money laundering activities received a total of $86.3 billion worth of stablecoins, slightly lower than in 2023 and on par with 2022. This figure may indicate that significant law enforcement activities over the past two years and regulatory legislative actions from major policy entities have effectively suppressed the money laundering crime situation in the encryption industry.

The proportion of the scale of stablecoins used for money laundering charged by major centralized exchanges.

Considering that centralized exchanges have unique advantages in terms of fund realization compared to other entities, making them more susceptible to money laundering groups, Bitrace conducted a fund audit of the hot wallet addresses of major centralized cryptocurrency trading platforms.

The results are similar to the investigation in the fraud chapter, where the scale of money laundering funds collected by the platform is generally proportional to its business scale. However, OKX's proportion has significantly decreased in recent quarters, which may be a result of its Compliance operations.

The on-chain freezing activities of stablecoins have significantly increased.

The number of stablecoins frozen by Tether and Circle

The year 2024 is a year for stablecoin issuers to actively cooperate with law enforcement. Tether and Circle together froze stablecoins worth over $1.3 billion on the Ethereum and TRON networks, which is double the amount frozen in the previous three years.

The number of stablecoins received by the frozen address that year.

Statistics on the capital transfer activities for frozen addresses show that the transaction scale in 2024 reached 12.9 billion USD, which is basically flat compared to 2023. This indicates that on-chain encryption criminal activities began to be active several years ago, but were not effectively combated until 2024.

*It is worth emphasizing that not all the drivers of the frozen addresses are related to the cases involved. In this statistical analysis, Bitrace did not exclude this part, so the actual scale will be slightly smaller.

The sanction trends of OFAC and NBCTF

Addresses associated with entities sanctioned by OFAC and NBCTF receiving stablecoin amounts

The Office of Foreign Assets Control (OFAC) under the U.S. Department of the Treasury and the Israeli National Bureau for Counter Terror Financing (NBCTF) are two agencies related to sanctions and counter-terrorism financing, which have cooperated extensively in combating terrorist financing and financial networks associated with terrorist organizations such as Hamas. They collect funding statistics related to blockchain addresses disclosed by these two organizations that are associated with sanctioned entities, with the overall funding scale reaching its peak in 2022 and declining year by year thereafter.

Although regulatory measures from government departments can have a significant impact on the operations of sanctioned entities, they are of little effect on criminal groups that exploit these infrastructures for illegal activities, as the anonymity and lack of requirements inherent in encryption technology make it difficult for such entities to be sanctioned and highly substitutable. Regulatory authorities should conduct more in-depth investigations into encryption crime and take corresponding law enforcement actions against criminal gangs.

Regulation brings positive effects to Hong Kong

2024 is a year of accelerated Compliance in the encryption industry. Globally, major regulatory agencies have shifted their attitudes towards cryptocurrencies from a wait-and-see approach to more active involvement, promoting the industry to develop in a more regulated and transparent direction. Taking Hong Kong as an example —

Hong Kong's compliance policies have built a safer and more controllable encryption ecosystem through clear legal requirements, customer fund protection, combating illegal activities, attracting institutional funds, and aligning with international standards. This not only reduces direct financial losses caused by hacking attacks, platform bankruptcies, or legal penalties but also lowers indirect risks by enhancing market trust and stability. For encryption entities, while compliance costs increase in the short term, they significantly reduce the likelihood of funds being exposed to uncontrollable risks in the long term.

The proportion of high-risk funds in the income of Hong Kong Web3 entity stablecoins.

Conduct a fund analysis on the VATP and VAOTC addresses primarily serving Hong Kong customers. The data shows that after the third quarter of 2023, the proportion of risk stablecoins flowing into the local area has sharply decreased, indicating that after the release of compliance policies and several landmark cryptocurrency-related cases, local trading activities of stablecoins related to risk activities have been effectively suppressed.

Summary

2024 is a year of comprehensive revival for the industry and a year when major economies begin to face the importance of the industry. Although the scale of encryption crime has not diminished, top-down compliance regulatory policies, as well as bottom-up industry self-discipline, have already brought positive effects to the encryption industry in some countries or regions.

The industry will usher in a safer and more trustworthy future, which we believe is self-evident.