In 2023, illicit addresses related to money laundering sent $22.2 billion worth of cryptocurrency to services where they can be converted to cash, a 30% decrease from the $31.5 billion sent the prior year, according to a new report from blockchain data platform Chainalysis. 

Bad actors who receive cryptocurrency through criminal acts use money laundering tactics to move the funds into services to conceal the origin of the funds and turn the crypto into cash. Chainalysis’ on-chain money laundering analysis focuses on two types of services and entities: intermediary services and wallets, which include personal wallets, mixers, and decentralized finance (DeFi) protocols; and fiat off-ramping services, which mostly comprise centralized exchanges but also include peer-to-peer exchanges and gambling services.  

While the overall amount of illicit funds going into services has shrunk, centralized exchanges have steadily remained the primary destination for such activity, though those exchanges have a unique ability to freeze suspicious funds. The amount of illicit funds going into DeFi protocols has grown due to the overall growth of DeFi, though Chainalysis notes that the inherent transparency makes DeFi a bad choice for hiding the movement of funds. 

Chainalysis also notes that the year-over-year decrease in crypto money laundering is partially due to an overall decrease in transaction volume as the crypto winter continued. However, money laundering activity dropped nearly 30% compared to the 15% decrease in overall crypto transaction volume.