Think Crypto is Used for Illegal Activities? Read This Report First

Cryptocurrency crime may be evolving, but the share of illicit such transactions remains strikingly small.

According to TRM Labs’ latest annual report on crypto crime, just 0.4% of all digital asset transaction volume in 2024 was linked to unlawful activity, marking a 51% drop from the previous year despite a surge in the overall market.

Illicit Crypto Activity Plummets Even as Total Volume Soars

According to the blockchain intelligence firm, the total transaction volume in the crypto sector increased by 56% last year, surpassing $10.6 trillion. However, estimated illegal flows fell sharply to around $45 billion, down from nearly $59 billion in 2023.

The report indicated that crypto crime was mainly dominated by sanction evaders, scammers, and funds linked to blocklisted addresses. Collectively, these categories represented over 85% of the illicit volume identified by TRM.

Additionally, networks like Tron, Ethereum, and Bitcoin remained the top venues for such activity. Interestingly, while Tron alone accounted for 58% of all criminal flows, its illicit transaction volume actually fell by half compared to 2023. TRM attributed some of this success to the effectiveness of the T3 Financial Crime Unit (T3 FCU), a pioneering public-private initiative targeting USDT misuse on Tron.

Since its launch, it has helped freeze over $130 million, and nearly 20% of blocklisted USDT on Tron has already been returned to victims or authorities.

Meanwhile, targeted sanctions against major Russian and Iranian exchanges such as Garantex and Nobitex, recently the target of a $49 million hack, have throttled inflows to restricted jurisdictions by 33%.

Persistent Threats and the Evolving Criminal Playbook

Despite the overall decline, TRM raised the alarm on emerging trends demanding vigilance. It stated that terrorism financing, particularly involving groups like ISIS-Khorasan (ISKP), is increasingly relying on crypto, with stablecoins remaining the primary choice despite a growing interest in privacy coins like Monero (XMR).

Hacks also witnessed an uptick, with $2.2 billion stolen, representing a 17% increase, primarily targeting DeFi protocols. As has been reported by other researchers, North Korean actors were disproportionately responsible, stealing nearly $800 million using sophisticated methods, often focusing on private key theft. In addition, their laundering tactics have adapted, utilizing decentralized bridges and moving funds rapidly across chains to make recovery exceptionally difficult for law enforcement.

But perhaps the most worrisome emerging threat is the rapid adoption of AI by fraudsters. According to TRM, criminals are now using large language models (LLMs) to craft highly personalized scam personas, generate convincing deepfake videos for extortion and investment scams, and produce sophisticated phishing messages.

They are also using AI to create fake IDs to bypass KYC, and even generate non-consensual explicit imagery. The blockchain research firm is expecting a significant expansion of AI-powered crime in 2025.

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