According to Chainalysis, the largest crypto-related sanctions imposed by the U.S. Office of Foreign Assets Control (OFAC) in 2022 significantly reduced the potential revenue of criminal enterprises.
Last year, the United States imposed sanctions on many crypto-related people and organizations for their roles in drug trafficking, money laundering, and ransomware attacks. Chainalysis examined how the sanctions affected three significant illicit enterprises: the Russian cryptocurrency exchange Garantex, the darknet market Hydra, and the cryptocurrency mixer Tornado cash.
Twenty cybercriminal administrators who used these services lost $14.99 million in potential revenue in the 60 days after the sanctions were imposed, according to Chainalysis. In addition, addresses associated with people who have connections to cybercrime groups are referred to by cybercriminal administrators.
In addition, 23 scam-related entities and 11 darknet-linked entities may have lost approximately $306,000 and almost $271,000, respectively. According to Chainalysis estimates, ten fraud shops and six ransomware-related entities lost another $52,227 and $57,727. Furthermore, the assessment revealed that 42 businesses dealing with stolen cryptocurrency may have lost $1.8 million in the two months following sanctioning the services under investigation.
However, the average anticipated loss of potential revenue across each category of crypto crime was far smaller after two months of sanctions implementation. Cybercriminal administrators lost the most money overall, with an estimated $750,000 in lost revenue.
Before the sanction, 34% of Tornado Cash’s funds came from illegal sources. 99.7% of the unlawful funds that Tornado Cash received over the course of two months were stolen money. 65.7% of all the stolen money that the mixer got was in cryptocurrency stolen during the Harmony Bridge incident. Fund inflows to Tornado Cash decreased by 68% in the 30 days following the designation of the sanctions, according to Chainalysis.
According to Chainalysis, sanctions against DeFi platforms like Tornado Cash are less effective because a smart contract can continue functioning even if a website is absent. Therefore, sanctions against DeFi services “function more as a tool to disincentivize the service’s use” instead of fully stopping it.