The value of cryptocurrency flowing into illicit addresses in 2023 was nearly two-fifths lower than the figure a year previously, with sanctioned entities accounting for the vast majority of activity, according to Chainalysis.

The blockchain analysis company revealed the news in a teaser of its forthcoming 2024 Crypto Crime Report. It tracks funds stolen in crypto “hacks” and money sent to addresses identified as illicit, but not money associated with money laundering or “non-native crypto crime” such as drug trafficking.

It claimed $24.2bn was received by the addresses it tracks as illicit in 2023, a drop of 39% on 2022’s $39.6bn. However, Chainalysis caveated this by claiming the 2023 figure may increase as it identifies more unlawful addresses and adds historic activity into its estimates.

As an example, the initial figure for 2022 was $20.6bn, but it has now grown to $39.6bn, largely due to $8.7bn in creditor claims against fraud-ridden crypto exchange FTX.

Chainalysis revealed that sanctioned entities and jurisdictions represent over three-fifths ($14.9bn) of the 2023 figure. That’s not surprising given how busy the Treasury’s Office of Foreign Assets Control (OFAC) in targeting Russian and other entities following the country’s invasion of Ukraine.

Read more on cryptocurrency-related crime: Crypto Crime Down 62% but Ransomware Activity Surges

The country also continues to harbor a large number of suspected ransomware actors and associated businesses such as Russian exchange Garantex.

“Ransomware and darknet markets … are two of the most prominent forms of crypto crime that saw revenues rise in 2023, in contrast with overall trends,” said Chainalysis.

“The growth of ransomware revenue is disappointing following the sharp declines we covered last year, and suggests that perhaps ransomware attackers have adjusted to organizations’ cybersecurity improvements, a trend we first reported earlier this year.”

Revenue From Crypto Scams and Heists Declines

Elsewhere, illicit revenue associated with crypto scams (-29.2%) and hacking (-54.3%) both fell year-on-year in 2023.

Interestingly, Chainalysis posited that scams have actually been declining annually since 2021, even taking account of under-reporting.

“We believe this aligns with the long-standing trend that scamming is most successful when markets are up, exuberance is high, and people feel like they are missing out on an opportunity to get rich quickly,” the report noted.

“Of course, the impact of romance scams on individual victims is devastating and should not be understated. And while increased reporting – at least in the US – is a good sign, we still believe insights into romance scams in particular suffer from under-reporting. We hypothesize that the true damage of scamming is greater than what reporting to the FBI and our on-chain metrics show, but overall, scamming is down, given broader market dynamics.”

Crypto “hacking” is harder for criminals to hide and so the figures here are more likely to be an accurate reflection of the underground market, Chainalysis continued. The downward trend in 2023 is apparently due largely to a significant drop off in DeFi heists.

“That drop off could represent the reversal of a disturbing, long-term trend, and may signify that DeFi protocols are improving their security practices. That said, stolen funds metrics are heavily outlier-driven, and one large hack could again shift the trend,” Chainalysis said.