Crime in the realm of Web3 is undergoing a significant shift. Previously, Bitcoin (BTC) was the go-to cryptocurrency for illicit activities and money laundering. However, according to Tara Annison, the former head of technical crypto advisory at Elliptic, criminals have now turned their attention to stablecoins. Annison shared these insights during a presentation at the recent EthCC event in Paris, shedding light on the various ways digital assets are being exploited for criminal purposes.
The presentation drew upon the expertise of Elliptic, Chainalysis, and TRM Labs, with Annison speaking from her experience at Elliptic, from which she had recently departed. She asserted that as the cryptocurrency industry has matured, the rise of decentralized finance protocols, mixing services, and stablecoins has opened up new avenues for criminals.
Bitcoin’s decline as the preferred cryptocurrency for illicit activities can be attributed to its maturation and increased mainstream adoption. Criminals have now shifted their focus toward dollar-denominated assets like USD Coin (USDC), primarily due to their ease of accessibility and the ability to launder funds through decentralized exchanges (DEXs). Annison stated, “The criminals use that as a target point. It’s also super easy to launder through DEXs. There’s deep liquidity, really good volume, so that’s pretty worrying.”
However, Annison offered a potential silver lining from a law enforcement perspective. She mentioned that centralized issuers like Circle can freeze specific USDC tokens before criminals have the chance to convert them into fiat currency through DEXs or centralized exchanges. This means that an increased number of accounts with USDC and USDT are being blacklisted, making the frozen funds inaccessible to criminals.
Aside from stablecoins, Ponzi and pyramid schemes continue to plague the cryptocurrency sector. Annison revealed that unsuspecting victims have lost a staggering $7.8 billion to these types of scams. Criminals are also becoming more sophisticated in their efforts to launder funds, utilizing chain swapping and asset swapping techniques to obfuscate their illicit activities. Annison estimated that approximately $4.1 billion has been involved in these money-laundering practices.
Interestingly, Annison highlighted that the bear market has had a positive effect on reducing scams in the sector. As prices of cryptocurrencies plummet during bear markets, the profitability for cybercriminals diminishes, resulting in a 46% decrease in scams compared to previous years.
Moreover, Annison shed light on the increasing use of cryptocurrencies to evade sanctions and finance terrorist activities. She specifically mentioned TRON (TRX) and Tether (USDT) as popular assets for illicit use.
The emergence of metaverse experiences has also attracted nefarious actors. Virtual worlds have become breeding grounds for various crimes, including phishing attacks, non-fungible token theft, wallet tampering, and augmented reality hacks.
Annison’s presentation emphasized the reality of criminal activities in the cryptocurrency sector, emphasizing the need for enhanced security measures to protect users and combat illicit activities.
Overall, the shift in Web3 crime from Bitcoin to stablecoins demonstrates the evolving nature of criminal activities in the cryptocurrency space. As criminals adapt to advancements in the industry, it becomes increasingly vital for law enforcement and security measures to keep pace with these developments, safeguarding the integrity of the digital asset ecosystem.