A recent study by Crypto ISAC indicates that despite the widespread belief that cryptocurrencies are the primary tool for unlawful transactions, cash remains the top choice for criminals involved in illicit finance.
Unlike blockchain transactions, which leave an immutable trail, cash transactions are more complex to trace due to the lack of a digital record, making them more challenging to track. According to the study,
“the scale of money laundering and terrorist financing through conventional banking channels, as reported by regulatory bodies and law enforcement agencies, dwarfs the volume of similar activities observed in the cryptocurrency space.”
The study highlighted that while cryptocurrencies have been linked to crime in notable cases, such as exchange collapses and thefts, these incidents make up only a tiny fraction of total crypto transactions. It also pointed out that although it is difficult to determine the exact scale of illicit activity in traditional finance, global estimates suggest that 2-5% of GDP—approximately $800 billion to $2 trillion—is laundered annually.
Law enforcement agencies use blockchain’s transparency to track illegal activities, making regulated crypto platforms valuable allies in combating crime. In contrast, when criminals use traditional finance systems, the lack of public transparency makes it more difficult for authorities to trace funds and apprehend offenders.
“This creates a higher burden of proof and requires the U.S. Attorney to empanel and jury to hear and issue the subpoena. Only then can law enforcement begin to piece together the forensic trail of the funds at issue.”
the study highlighted
According to a recent blockchain analysis firm Chainalysis report, only 0.34% of on-chain transaction volume in 2023 was linked to illicit activity. However, during Q3 2024, phishing attacks and private key breaches resulted in over $750 million in crypto thefts, as reported by CertiK. Although security incidents decreased to just over 150, losses increased by 9.5% from the previous quarter. CertiK estimates that nearly $2 billion has been stolen in 2024, with phishing emerging as the primary attack method in Q3, leading to $343.1 million in losses across 65 incidents.
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