According to a recent report by blockchain intelligence firm Chainalysis, cryptocurrency scams have seen a significant decline of 77%, dropping from $3.3 billion to $1.1 billion in the first six months of 2023. However, the report also highlighted a surge in ransom attacks, with perpetrators earning 62.4% more revenue compared to the same period in 2022.
This decline in scams marks the second consecutive year of decreasing scam revenue, which is contrary to the historical trend where scam revenue tends to increase during bull markets. Despite positive price movements in the cryptocurrency market, which usually make victims more susceptible to scams, 2023 has seen a drastic decline in scam revenue.
Fall in Inflows to Illicit and Risky Entities
Chainalysis observed that inflows into known illicit entities have dropped by 65% during the first half of 2023 compared to the same period last year. Similarly, inflows to risky entities, including cryptocurrency mixers and high-risk exchanges, have fallen by 42%. While decreasing transaction volumes could partially explain this decline, Chainalysis noted that illicit inflows have dropped at a faster rate.
Kim Grauer, the director of research at Chainalysis, suggested that past scam victims might be more cautious in their investment decisions, leading to a decrease in scam revenue. Grauer also credited government and industry awareness campaigns, as well as media reporting, for educating people about the risks associated with scams.
The Role of Artificial Intelligence and Deepfakes
Chainalysis warned about the potential use of artificial intelligence tools, including deepfakes, to promote scams. The firm highlighted the rise of romance and pig butchering scams, noting that AI could be utilized to increase their effectiveness and scale since these scams primarily rely on text-based interactions.
The Resurgence of Ransomware Attacks
While cryptocurrency scams have seen a decline, ransomware attacks have experienced a resurgence. Chainalysis reported a 62.4% increase in ransomware revenue, reaching $449.1 million in the first half of 2023. Attackers are now targeting large-scale organizations with deep pockets, aiming to extract the highest possible ransom payments from these willing payers.
The increase in ransom attacks can be attributed to the strategy of “big game hunting,” which involves targeting wealthy organizations. Chainalysis noted that ransom attackers are on track for their second-biggest year ever, trailing behind the record set in 2021.
Chainalysis quoted Risk Officer Andrew J. Davis from cybercrime consulting firm Kivu, who suggested that the decline in ransom attacks in 2022 might have been due to stronger cybersecurity practices and stricter laws against paying ransoms. As a result, ransom attackers are now focusing on extracting the maximum amount of money from organizations willing to comply.
Future Implications and Limitations
Chainalysis acknowledged that the figures presented in the report are a conservative estimate and that illicit and risky transaction volumes are likely to increase as new illicit activities are discovered. Additionally, the data does not account for crimes where cryptocurrency is used as a form of payment.
While cryptocurrency scams have seen a significant decline in 2023, ransom attacks have surged, targeting large-scale organizations for maximum financial gain. The use of artificial intelligence tools, such as deepfakes, poses a new threat in promoting scams. It is crucial for individuals and organizations to remain vigilant and informed to mitigate the risks associated with cryptocurrency-related crimes.