“It is a really small number and I think that’s a really important point. Cryptocurrency is a lot safer than people think.” — Kim Grauer, Chainalysis head of research

It’s long been a staple argument of most crypto-skeptics that digital assets are only used for criminal activity. A new report from blockchain forensics firm Chainalysis – again – disproves this misconception in stark terms.

The introduction to the firm’s report, “2023 Crypto Crime Trends: Illicit Cryptocurrency Volumes Reach All-Time Highs Amid Surge in Sanctions Designations and Hacking” reveals the miniscule amount of crypto that’s used for criminal activity.

“Overall, the share of all cryptocurrency activity associated with illicit activity has risen for the first time since 2019, from 0.12% in 2021 to 0.24% in 2022,” according to the analysis. That’s right, it’s far less than 1 percent of all crypto transactions. Chainalysis will release its full 2022 crime report next month.

So, there are a few caveats. As Kim Grauer, Chainalysis’s head of research, told me, the numbers for criminal activity always increase over time as more information is gathered. If the crypto-lending firm Celsius – which filed for bankruptcy last year and is being sued for alleged fraud by New York state officials -- is found to be a Ponzi scheme, for example, its activity will be added to the 2022 annual total of bad actors in the space, she said.  

In the big picture, however, criminals are barely using cryptocurrencies.

“It is a really small number and I think that’s a really important point,” Grauer said to me. “Cryptocurrency is a lot safer than people think.” The problem with the narrative that crypto is the playground for crooks is that Chainalysis and other forensics firms have been disproving it for years. Still, skeptics like Stephen Diehl, who has said crypto is “a giant scam, although a complicated scam…” persist.

Source: Chainalysis

But let’s let Chainalysis make the case. “Overall, illicit activity in cryptocurrency remains a small share of overall volume at less than 1%.  It’s also worth keeping in mind that despite this year’s jump, crime as a share of all crypto activity is still trending downwards,” according to the report’s introduction.

Overall, illicit activity in 2022 using cryptocurrencies rose to $20.1 billion, an all-time high. What’s the comparable number in traditional finance, you ask? Good question, and one that cannot be answered. The inherent transparency in a blockchain system allows for this type of analysis. Its counterpart in fiat-based banking doesn’t exist. It’s a dark market where cash can be used for whatever nefarious activity you can think of.

Source: Chainalysis

Grauer said that was the other major takeaway from reports like this. Because blockchain transactions are public and traceable, “we can do this,” Grauer said. “We can put the number out because of the transparency afforded by the blockchain.”

Wouldn’t it be grand to know the same figure for cash illicit activity? And wouldn’t it also be nice to put to bed the idea that crypto and digital assets are only for criminals?