The latest report from blockchain analysis firm Chainalysis reveals that darknet markets in the crypto industry saw an increase in revenue in 2023, making them one of the two categories experiencing growth. According to the “2024 Crypto Crime Report” released on February 29, darknet marketplaces generated at least $1.7 billion in revenue in 2023, bouncing back from the previous year when Hydra, the world’s largest darknet marketplace, was shut down by authorities. Although no single marketplace has replaced Hydra, smaller marketplaces are thriving by catering to specific niches and developing specialized roles. The report highlights Mega Darknet Market as the leading marketplace, with over $500 billion in crypto inflows. However, the revenue from darknet markets has not yet reached its peak levels during Hydra’s reign.
Eric Jardine, the cybercrime research lead at Chainalysis, stated that the emergence of niche darknet marketplaces competing for market share is not a new phenomenon and follows the trend seen after the closure of darknet marketplaces such as the Silk Road and AlphaBay.
In addition to the revenue increase in darknet markets, 2023 also witnessed a doubling of crypto-linked sanctions imposed by the United States Office of Foreign Assets Control (OFAC). A total of 18 sanctions were placed on individuals or entities, all of which included cryptocurrency addresses in their designation. Crypto inflows to sanctioned entities and jurisdictions accounted for 61.5% of all illicit transaction volume, amounting to $14.9 billion in 2023. The report indicates a shift in crypto-linked OFAC sanctions towards groups and individual actors, moving away from major darknet markets like Garantex and Hydra, as well as mixers like Tornado Cash. Among the individuals sanctioned are the North Korean hacking group Kimsuky, crypto mixer Sinbad.io, Russian national Ekaterina Zhdanova, and the Gaza-based MSB Buy Cash.
The report does present some positive figures, including a decline in revenue from crypto-based scams compared to the previous year. Although scams are still a major source of crypto-based crime, generating $4.6 billion in revenue in 2023, this figure is lower than the $5.9 billion reported in the previous year.
However, there has been a rise in new types of scams, such as romance scams, which have more than doubled in revenue year-over-year. The data indicates an 85-fold growth since 2020. The report highlights that romance scams have the worst impact on victims due to the average payment size. Approval phishing scams have also become more prominent in 2023.
According to Jardine, romance scams are on the rise because scammers are opportunistic and effective. When asked about insights to avoid scams and navigate crypto-linked cybercrime in 2024, Jardine advised individuals to be cautious in their on-chain and online interactions to minimize the risk of scams. He also emphasized the importance of identifying the on-chain footprints of scam networks and called for collaboration between law enforcement and private sector actors to recover funds stolen from victims. Jardine further stressed the significance of using services that prioritize security in the decentralized finance space and maintaining good digital hygiene, especially in terms of password and seed phrase management.