Public Key Podcast

2023 Crypto Year in Review: Podcast Ep. 88 – Kim Grauer

January 2, 2024 | by Chainalysis Team

Episode 88 of the Public Key podcast is here and we are happy that you love the refreshed look. 2023 has been a bit chaotic in the crypto industry. There are more questions than anything else, but in this episode, Kim Grauer (Director of Research, Chainalysis) is here to answer them all and recap a wild 2023 and give us a few predictions for 2024. 

You can listen or subscribe now on Spotify, Apple, or Audible. Keep reading for a full preview of episode 88.

Public Key Episode 88: The highlights and challenges of crypto in 2023

2023 has been a bit chaotic in the crypto industry. There are more questions than anything else, but in this episode,  Ian Andrews (CMO, Chainalysis) speaks with Chainalysis’ very own Director of Research, Kim Grauer about the major events and trends in the cryptocurrency industry in 2023.

They cover topics such as the surge in asset prices, the increased focus on combating crypto crime by creative government agencies, the return of ransomware attacks, and the continued rise of pig butchering and investment/romance scams in the industry.

Kim updates us on sophisticated phishing schemes, the crackdown on the crypto-related fentanyl trade and the ongoing threat of North Korean hackers, and other important stats from both the crypto crime and crypto adoption index reports.

The pair highlights the growing usage of stablecoins in jurisdictions where local currency is unstable and provides statistics backing up the fact that NFTs are definitely not dead.

Quote of the episode

“Some of our researchers on our team found that some of these purchases actually come before border seizures. So are we getting into a point with crypto analysis where we have enough data where we can get predictive?” – Kim Grauer (Director of Research, Chainalysis)

Minute-by-minute episode breakdown

  • (2:10) – Introduction and discussion of the upcoming 2023 Chainalysis Crypto Crime Report
  • (3:58) – Analysis of the increase in asset prices and surge in the value of Solana (SOL)
  • (7:40) – Creative efforts by law enforcement in disrupting cybercrime and ransomware
  • (12:35) – Overview of the Global Adoption report and its importance
  • (15:27) – Middle-income countries saw a bounce back in adoption and India topped the index for the first time
  • (18:50) – Stablecoins are becoming a significant part of the crypto ecosystem
  • (20:45) – Ransomware and Pig Butchering activity is on the rise
  • (26:02) – Fentanyl production and distribution networks mapped using cryptocurrency
  • (28:15) – Concerns about North Korea’s continued hacking and crypto thefts
  • (30:02) – Are NFTs Dead?

Related resources

Check out more resources provided by Chainalysis that perfectly complement this episode of the Public Key.

Speakers on today’s episode

  • Ian Andrews * Host * (Chief Marketing Officer, Chainalysis) 
  • Kim Grauer (Director of Research, Chainalysis)

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Transcript

Ian:

Hey everyone. Welcome to another episode of Public Key. This is your host, Ian Andrews. We got a special episode today. My occasional co-host and director of research at Chainalysis, Kim Grauer, is joining us on the show. Kim, how you doing?

Kim:

I am very excited to be here. This is a fun episode to record every year.

Ian:

Stephen and I just got the Spotify wrapped, and at least on the Spotify channel, you and I had one of the most popular Public Key episodes of 2023 the last time we did one of these roundups. So I’m expecting great things here. I don’t know about you. No pressure.

Kim:

The crime one, right?

Ian:

Yeah, I think so.

Kim:

And I mentioned, the people love their crime. They do. Crypto crime in particular.

Ian:

Well, it’s timely, because we’re getting ready to start publishing the 2023 Crypto Crime Report. I think we’ve put out one preview section here before the holidays as a teaser, but as soon as we get back in the new year, it’s going to be full throttle. Crime statistics for the masses.

Kim:

Yeah, we’ve been heads down for two, three months now, and actually it kind of percolates throughout the year as well, and this is the exciting time when all the numbers are coming together, so we’re learning about what we’re seeing in real time now, and really everything is just starting to come together and then you will be inundated with section after section at the start of the year, maybe 10, maybe 12 sections this year. It’s going to be a really exciting crime year to report upon.

Ian:

I can’t wait. Now, I thought today we could maybe do a round up and look back over the last year because there’s been a ton of stuff that happened in crypto. Maybe the biggest story is the asset prices are back. I was looking at some numbers this morning on CoinMarketCap. You and I could have gone and bought a whole Bitcoin for about $25,000 a year ago. Today it’s trading at over 42,000. What is going on? Actually 43.5 as of looking at it right now.

Kim:

Well, it’s definitely a breath of fresh air and finally we can as an industry really breathe a sigh of relief a little bit after a tense, what felt like multiple years of being in a bear market and wondering when things are going to turn and seeing this positivity is really refreshing. I think when people try to explain what’s happening, there’s really two directions that you can go. There’s the, what’s happening within crypto to explain price changes and what’s happening in the general world.

Before we hopped on, I looked at, I just ran a correlation of Bitcoin ETH prices against the stock market, and those things are really moving together. So I think that does a lot of the work as well that we’re seeing global asset prices in general bounce back. We’ve documented this correlation in the past, that crypto is a mature asset now. But then you can look at within crypto, what’s happening within crypto, and that’s where you see the variation. So why is Bitcoin up? Or why is SOL, I think you said, up at least about 600% year on year versus other crypto assets? And I think you can tease out within crypto stuff there and from that you might start to look to questions like, oh, there’s been a lot of Bitcoin ETF talks, for example, and people have been thinking that it’s about to happen, some of these ETFs.

There have been a lot of filings and there have been a lot of discussions in big institutions that have expressed their interest in Bitcoin in particular this year, which might explain why we’re seeing this surge in Bitcoin. So I think you have those two narratives that can really help you flesh out what’s happening.

Ian:

It’s kind of dizzying to think about. Something like Solana, which felt to a lot of people in the industry, I think it was seen as dead. In the wake of FTX where there was all sorts of uncertainty around the role that FTX and Sam Bankman-Fried were playing inside the Solana ecosystem, they’d invested in lots of projects. They were obviously major token holders between FTX and Alameda, and it seemed like the ecosystem there had flatlined for a little while, but in the last few months, it would be hard to argue that it’s returned with a fervor. I saw a stat the other day that says the DeFi trading volume in Solana actually surpassed ETH. So there’s some real excitement there, driven, at least in small part, by the new Bonk token, which has got everybody very excited. It’s December’s version of the Pepe token from earlier in the year maybe.

Kim:

Yeah, so that within crypto, SOL specific. I also have always noticed the volatility in Sol, so I get notifications whenever there’s something, anything out of a 5% daily price range for top assets. Throughout the year, I’m always getting a SOL notification. I think there’s a lot of SOL volatility already and it’s a great asset to trade for that reason, but I don’t know what’s explaining this really sudden surge in the past week or a few weeks that’s happening within SOL.

Ian:

It’s fun to watch. I think we’re going to have to dig into it more in 2024. Because I’m interested to see how do you bring in an ecosystem? Crypto is so narrative-driven. When the story’s good, the story’s really good. And then when the story goes bad, you tend to lose focus and attention and I don’t usually see it ever come back. And so this return from the dead narrative, it maybe warrants some further on-chain exploration to see if we can see any drivers of what’s creating that. So we’ll take that as a note maybe for future research.

One of the other topics that I was thinking a lot about reflecting on the year, is it seems like all around the world, government agencies have really stepped up to the challenge of illicit activity in crypto. I was thinking about, we started the year with a major takedown of an outfit called Bizlato that I think was laundering a lot of Russian money. We saw big takedowns of some of the larger ransomware rings like Hive, TrickBot, that was one of the big operators. They got sanctioned. So it seems like we’ve reached a level of maturity, not just with US federal agencies, but European ones as well, where there’s a real intense focus on trying to shut down some of the worst bad actors in crypto. What do you think?

Kim:

It would definitely be a year of law enforcement wins and proactivity. Bizlato is an interesting one because we’ve been tracking it for years. It’s been a service that has been a major money laundering operation, and we would point it out in our crime reports that, oh, we actually know what building Bizlato is registered in Federation Tower in Moscow City. But we would have this question of, okay, well what do you do about it? How do you shut it down? What are the next steps here? It’s in Russia, it’s receiving all of these funds. And so we had an answer to that this year.

So Bizlato getting shut down and cashing out billions of dollars mostly from, as you mentioned, Russian schemes. And then shortly after that there was the Hive disruption, which was a really… I would say this one was a creative attempt or a creative effort by authorities where what they did was they seized the servers and were able to distribute decryption keys to reduce the victims. We saw another creative ransomware reaction with the Dutch police in DeadBolt where-

Ian:

This is one of my favorite stories. This is such a great good guys winning over the bad guys story. Go ahead and unpack this one for folks.

Kim:

It’s just law enforcement starting to really get creative with using on-chain data to their advantage. I think there’s been this narrative that on-chain data, the blockchains help bad guys, but actually blockchains help good guys. Because law enforcement in this case, they realized that there was a quirk in the code with the payments when victims would send a ransomware payment to the DeadBolt admin where the decryption key was actually released before the payment was finalized, and so they could use that to their advantage to undo the payment after it was sent and then retrieve the payments from the victims by getting the decryption keys.

This with the Hive, where the Hive took, the Hive authorities, they took over the servers and were able to distribute decryption keys quietly. I love these two cases, because it shows creativity and it shows utilizing blockchain and data to help victims and disrupt major operators.

Ian:

We always talk so much about the technical sophistication on the bad guy side, but to me this is really a great illustration of the hard work that law enforcement’s put in recruiting expert technologists and then putting them to work. And maybe there’s a turning tide here where we’ve got some distinct advantage against the bad guys, which is great.

Kim:

And there was also the major disruption of TrickBot. $833,000,000, as of our last update, had been received by that major cybercrime organization, which was, as of our last update, TrickBot was the second highest grossing cybercrime organization behind North Korea and had been associated with all types of ransomwares and was one of the biggest malware strain operators. And we saw that they were sanctioned and there was a big crackdown against TrickBot, which was great to see that effort. You mentioned a few others, Sinbad most recently. OFAC imposed sanction on Sinbad, which was another North Korea associated mixer, mixing service, that we actually identified last year as North Korea is always the first, North Korean hacking groups are always the first to adapt to new-

Ian:

They’re trendsetters.

Kim:

They’re trendsetters, there.

Ian:

Tornado Cash isn’t cool enough anymore. We’re done with those guys. We’ve got Sinbad. Sinbad’s where all the cool money launderers go to work.

Kim:

The cool money launderers use Sinbad. We were calling them homegrown mom-and-pop shops last year. Sinbad not necessarily fitting within that, but there were others that fit that as well. We named a few in the crime report last year, but Sinbad was becoming very apparently a big, big problem. And so to see how quickly OFAC was able to respond, shut that down, make the money laundering process more difficult was another really huge win for the industry.

Ian:

There was a big conversation that we had during the year about the effectiveness of sanctions. I remember we published a blog looking at a couple different cases where Treasury department had applied sanctions against crypto entities. Some cases highly effective, in others, Garantex I think is a big example of this. Russian exchange continues really to operate their customer base primarily in Russia, so a US economic sanction doesn’t really have the effect that it might for a business that’s connected to Western banking system or transacting in US dollars. But an interesting thing just happened in the last few weeks, where Tether announced they’re now respecting these sanctions alerts and proactively freezing wallets containing funds that show up on the sanctions list.

I think this is a really interesting evolution of the ecosystem where at one point in time it was this question of, well, are sanctions actually going to be effective at deterring bad actor behavior, particularly if they’re operating outside of a jurisdiction that responds to the United States or European entities? And for a while the answer was no. But now where you have players like Tether saying, “Oh absolutely. Yeah, you sanction a wallet, we’re going to freeze it. We’ll hold those funds.” You’ve massively removed the profit opportunity, I think, at least for in that currency. So it’ll be interesting, I think, next year to see if we see other providers start to follow suit, whether that’s DeFi platforms or maybe some of the other stablecoin issuers taking lead from Tether on this.

Kim:

It’s kind of like they anted it up. They’re at a poker table and then threw more chips in, and so they anted up. It goes hand in hand with the increasing dominance and importance of, not just Tether, but stablecoins for the industry and the real fact that let’s use all the tools at our disposal to stop this type of crime and where are the most effective levers that we can pull? And I totally agree that this is a game changing way to really reduce the profits that can be achieved from some of these types of criminal activities.

Ian:

Well now, this year was not all about crime. Your team just finished publication of the Global Adoption report. What were some of the big takeaways, maybe trends, that changed over last year’s report? Maybe just start with some of the highlights that came out of the research this year.

Kim:

I posit that this has potentially become one of the maybe, still second to the crime report, but up there in terms of a report that is really valued by the industry. Our research team has always chosen to research and pursue topics that the industry just needs to know about. And so this global adoption report, I think addresses one of the biggest black boxes that maybe regulators or policy makers have around the world, which is, well, how just are people using cryptocurrency? Some can’t wrap their head. They’re like, “I don’t use it so people must not use it.” This report we put out maybe five years, maybe four years, and it’s trying to say, well, to answer how people are using cryptocurrency, you have to look at the place where people are actually using cryptocurrency.

What we found this year was, the fact was when we finished this report, it was mid-June. We were in a major bear market, so global adoption was down mid year. I’m going to be excited to do the next year report, but global adoption was down, but if you break out the regions of the world into low-income country, middle-income country, high income country, there was actually a bounce back within the middle-income country, which takes up the vast majority of the population. So high-income countries and low-income countries were down. It wouldn’t surprise you to know that maybe the United States was more impacted by some of the FTX stuff and spooking of some of these bigger institutions, but around the world, places like India, Nigeria, Vietnam, Ukraine, Philippines, we saw more of a bounce back by mid-year.

And so in terms of which countries are at the top of the index, a lot of the times we see the usual suspects and I think that’s because crypto adoption is, what you want, is a steady sustainable year-on-year increase of activity. You don’t want the big, sexy story of all of a sudden this new country is on the market because adoption is slow and steady and sustainable. And so it’s really makes sense that we see the usual players at the top of the index.

I’d say that what was cool to see was India top the index this time for the first time. And India is a really interesting market because of some of the regulation that’s happening within India. But India has strong adoption in almost every kind of metric that we measure, whereas usually a country might be optimized for one type of use case like the Philippines and gaming or the United States and institutional investment, whereas India has strong adoption in retail, DeFi, overall centralized exchange activity. And when you talk to people in that region, you hear all those use cases popping up. There’s a lot to unpack here. I always say that you could do a dissertation on crypto adoption in every country.

Ian:

Well, for anyone that’s downloaded the report, it is dissertation length for sure. I’ve thrown it into an LLM just so I can ask it random questions when I’m trying to look up a fact.

I actually think the first point you made there about even though asset prices were down for much of the year, the fact that we saw sustaining transaction activity in that middle income country segment is really interesting. Because to me that says, they’re using cryptocurrency for reasons other than simply a store of value, an alternative investment vehicle or kind of the fun speculation side of it. It’s the case of, hey, I need to send somebody money for something and crypto payment rails are useful to me. I don’t know that we actually got data that necessarily has indication on that point specifically, but that’s sort of my, if I squint at what we’re saying there, that was the takeaway that came to me.

Kim:

Yeah, definitely. And it also depends on the region as well. If we look at Latin America or if we look at countries where there was a lot of currency issues, Turkey, Argentina, we see that stablecoins are the most purchased asset on exchanges. So if you look at what is the most purchased asset in Turkey with the Turkish lira, it’s by far and away going to be a stablecoin. That gives you a strong indication of, okay, people are looking for a stable store of value.

If you talk to anyone in Latin America, not anyone, this is a gross generalization, by and large you can draw out themes, and people in my conversations with Latin America cared less about what’s happening with the tech stack in blockchain and more about what you were saying. How can I send money to my friend who lives across borders? And you reminded me of another big theme, which was, one thing I circle around each year and really want to one day get a good data set around are crypto gray markets. Import exports using crypto, and we talk to business owners in Hong Kong, for example, who are facilitating business operations of commercial goods across borders between Hong, Kong and Vietnam and India using crypto and have indicated it’s massive market. So it’s there.

Ian:

Wow. In that case, are they using dollar-denominated stablecoins?

Kim:

I have the breakdown and I do believe we put it in the report, but it was mostly Tether. Mostly Tether, and then there’s a smaller fraction using Bitcoin and ETH, and then you have the very small fraction of longer tail assets, which they don’t necessarily engage with.

Ian:

Because I think this is one of the interesting things. If you look at stablecoin volume, or the transactions that involve stablecoins as a percentage of total transaction volume across the major crypto ecosystems, I think the number’s up around 60%. So almost two-thirds of all transactions involve stablecoins, which I think surprises a lot of people. It’s definitely a shift from where we were just a few years ago. And most of the stablecoin assets are dollar-denominated.

So there’s two competing narratives that seem to come up here. One is, oh, stablecoins are going to be disruptive to traditional economy. They’re outside the control of the central bank, therefore countries lose control over their monetary policy, not good for long-term economic stability. On the other hand, I think for a lot of countries, their goal is not to maintain stability in their local currency, but actually to move to dollar-denominated currency. We’ve seen this with the recently elected president in Argentina, I think, has declared his intent to dollarize the economy. So I think there’s more to be researched here about are stablecoins just digital versions of a fiat that exist in the local market, or is it the broader desire to get on the dollar train?

Kim:

I mean, that, to be frank, there’s massive economic questions that come with that on what that means for the US dollar and what that means for the strength of the US dollar as a global currency reserve. But no doubt, if you want an up… Well, now a lot of charts are up and to the right, because we’re unhappy times. But in the bear market, if you were still looking for that up and to the right chart, it would’ve been around stablecoin adoption, the number of active stablecoin wallets, which are by and large, mostly U.S dollar denominated stablecoins, but also specifically huge amount of Tether activity all around the world. And those are becoming a part of crypto that is not just there’s crypto and then a small fraction is stablecoins. It’s becoming almost the story. And how we deal with that and what the implications of that are going to be sorted out, but I think that you’ve pointed out some really important themes to pay attention to.

Ian:

I know. Our list of research to do in 2024 gets longer the more we talk on this podcast.

Kim:

Yes.

Ian:

Shifting topics again. One of the things that I had a guest on early in the year from our partner Intel471, and I think he predicted that we would see the return of ransomware in 2023, after a momentary lull the year before. And I think that, unfortunately, came true this year. We’ve seen a big spike in ransomware activity, right?

Kim:

Yeah. Ransomware is back. Starting maybe two months ago, we started to get concerned that this could be the biggest year ever for ransomware. Now, we’ll be crunching the numbers end of year and seeing where we fall, but we’re definitely up from last year and we’re analyzing the lull from last year as well. Was it a lull, or was it maybe disruptions that were highly effective from law enforcement, or was it something else? And with that, will allow us to understand why we’re excelling again.

Because if it was a lull, then there was something that worked or were operators pivoting to different types of crime? It’s really important to understand what allowed us to reduce the amount of ransomware in the previous year so that we can try and repeat that again. But unfortunately, ransomware is roaring back and we can see it in our real-time data. Every day we’re seeing ransomware payments coming in, and there’s a lot of reasons as to why that is.

Ian:

Yeah, well stay safe out there everybody. Don’t click on that link. One of the other big topics we spend a lot of time on this show talking about is, pig butchering. The very specific romance, long game scam, and other types of scams. It seems like this has continued just to get bigger and bigger every year.

Kim:

There are many different types of scams. A few years ago you would’ve probably really been focused on investment scams like PlusToken, before that ICO scams. Now we’re in a place where, I don’t want to say people have wised up, because there’s still times when you look at a crypto site and it looks really legitimate and it is legitimate for a while, and then there’s a rug pull, so you wouldn’t really have known that something was going to be a scam, but the pivoting that’s happening is more towards these romance scams.

We did a big case study that we released last week in the crime report. It was about approval phishing, which is technically a pig butchering scam because it required investing in one person to get them to trust you. This was a $1 billion plus scam network that was just using one specific highly technical tactic to get people to agree to basically giving someone else the ability to move crypto funds on their account. They would’ve never known that they did this. It’s through a phishing link and it’s just one highly technical way that probably not a lot of people know how to do. And it was over a billion dollars associated with those types of pig butchering scams.

This is a big problem, and it’s happening not just in crypto, but in traditional US dollars as well. It’s a existential fraud problem that we’re facing because of the pervasiveness of the internet and the ease of transaction around the world. And the good news is with crypto, you can see a lot of the transactions, but I think that law enforcement around the world are really struck with how do we stop this problem?

Ian:

Well, we saw China apparently made a pretty large move. They announced they’d arrested 30,000 people in a takedown of some of these industrial scale call centers that were running some of these larger scams. Now, I’ve been cautioned by a couple people that don’t believe everything that you see coming out of the Chinese media, particularly on topics like this. Taken it face value, 30,000 people blows me away.

Kim:

Its huge.

Ian:

Now we don’t know, did the 30,000 people really exist? Were they all actually involved in pig butchering or were they in trouble for some other reason? Was the entire story fabricated? Hard to tell. But the impact, I think it gives you a sense, just the fact that anyone could claim that many people were arrested, gives you a sense of the scale of the operations that stand behind these scams. This is not one person sitting in a computer in a dark room trying to hack your crypto wallet. This is highly organized and industrialized criminal activity, which is wild.

Kim:

It’s a business.

Ian:

Yeah, it really is. You’re right.

Kim:

It’s someone set up a business and probably grew organically and then hired more and more people and was successful and it’s probably runs like a business.

Ian:

You wonder if there’s venture capital funding for a criminal underground? How does that work?

Kim:

Although you do hear stories of there being, with these pig butchering call centers, the human trafficking dimension as well-

Ian:

Yeah, it’s terrible.

Kim:

… human slavery. Where people are forced to do this with no pay. So there’s that dimension as well that we’ve uncovered in parts of the world as well.

Ian:

Which is just terrible. It’s a double victimization there on both sides of the transaction. Hopefully the arrests China talked about has some positive impact for us in the new year.

Onto another topic, fentanyl. I’m going from sad to terribly sad, I guess, in order here. Fentanyl has become, I think, the number one killer of young people in the United States. It’s a terrible drug. I’ve spent a lot of time this year trying to understand where the fentanyl comes from. Interestingly the research team was able to discover, and actually map, because of cryptocurrency, the flow of funds happening between Mexican cartels, who are the primary people importing fentanyl into the United States, and these chemical precursor shops that primarily operate out of China. I thought this was amazing research. I mean, it really uncovered the criminal network that exists in producing illicit drugs.

Kim:

It was a big effort from our cybercrime lead, Eric Jardine, and the team on the investigation side. We identified addresses associated with precursor shops, which are selling the chemicals that create fentanyl. There are these shops that accept cryptocurrency and we can identify them through our, both advanced techniques, but also our investigators who have large law enforcement networks. And then from there we trace the funds and are able to see that the funds are making their way to Mexico and then see what happens from there.

So we can create these maps that document the flow of funds, and there are tens of millions of dollars, which is definitely a lower bound of how this is happening because it’s just the addresses that we know about. But it’s been extremely exciting to be able to get this in the hands of the right people and know that you just are able to follow the money and maybe lead to an account freeze and stop or disrupt some of these networks that are bringing such highly damaging chemicals that eventually make it into the United States.

Ian:

This is where I think crypto presents an opportunity. It’s not the criminal act that needs to be focused on in this case, it’s the lead that can be used to facilitate disruption of the narcotics trafficking itself.

Kim:

We were getting into some more experimental stuff that is not just limited to this kind of work, but some of our researchers on our team found that some of these purchases actually come before border seizures. So are we getting into a point with crypto analysis where we have enough data where we can get predictive? Where we can alert law enforcement maybe to bulk orders or be on the lookout? And then certainly you can break it down by maybe certain groups spend a certain amount of time before the, I guess, the product goes across the border.

We’re in the very early stages of this, but there has been a positive outcome in terms of using the funds arriving at distribution sites, not just in this case, but also in ransomware, investing in maybe some ransomware infrastructure, and then the ultimate attack as an early warning detection of some of these crimes happening.

Ian:

I’m all about getting to real time and predictive in 2024. That’s my goal for the year. We’ve challenged the product team to make some progress there. What’s going on with our friends in North Korea? And I say friends in the most sarcastic way possible. They’re obviously not our friends. They don’t seem to be slowing down at all. They love stealing crypto.

Kim:

No, they’re not slowing down at all. And we’ll put out the numbers in our crime report, but we can say that it’s not slowing down. Sometimes the high level numbers that are released related to North Korea or hacking in general, can feel… It’s hard to draw, to extract a real trend from the volume because you will have maybe 50 10 million hacks and then one $700 million hack. So it’s very outlier dependent. So the threat and the looming threat of North Korea as an attacker is… For example, if they breach a system that has 700 million, they’re going to take all 700 million. So the fact that some attacks they’re only taking $10 million means that that was all they had access to.

This is a major problem, as we talked about before, they’re quick to adapt and they’re methodical and they know where the weak points are in the industry and don’t care about getting caught. But Chainalysis, I’m proud to say is, I would say the leading expert on North Korean money laundering tactics and so are tracing these funds down, actively freezing funds at a pretty high rate from some of these hacks. We were talking about that sometimes, in the money laundering section of the crime report, we’ll see funds arriving at an exchange from North Korea, but that doesn’t mean that it was necessarily laundered. We have to appreciate that a lot of times these funds can get frozen as well, and we’re seeing that happen at a higher rate.

Ian:

Yeah, I think that’s exciting is, yes, the North Korean hackers are adapting tactics. You take down Tornado Cash, they start using Sinbad, you take down Sinbad, they start using something else next. But the good guys are adapting too. And I think we’re figuring out how to make this much less profitable a scheme. It’s one thing to steal the funds from an exchange or from individual wallets or a DeFi protocol, it’s another thing entirely to turn that into hard currency that they can actually use. I’m excited to see the good guys actually rack up some wins here either on recovery or freezes and just make it really hard for them to make money. Let’s go have them focus on some other target other than crypto in 2024.

Kim:

And we’re excited to announce what the next Sinbad is as well in the crime report.

Ian:

I can’t wait. I can’t wait. Well, maybe last question for you, NFTs. Are NFTs dead? Is there anything happening in that ecosystem?

Kim:

I actually pulled the data this morning for this, and I don’t know what you would have expected, but it wasn’t as down as I would’ve thought. Something like 600,000 sales in last month.

Ian:

Wow.

Kim:

NFT sales, just on Ethereum. And so it depends on what you mean by dead really. But there’s still an active space. It’s kind of flatlining, if you were to look at it over time. Last month did see a surge, but nothing compared to the previous month’s highs of NFTs when we really saw the boom. But a lot of that was people, high-frequency trading of NFTs. And you wonder, what is the point of an NFT? Is it a collectible or is it something that’s meant to be traded a million times in a day? And if you’re weeding out that activity, then one thing that we’ve talked about a lot at Chainalysis is, what’s real usage versus some of this hyper-trading activity that makes volumes look really high, and how do we know what the right measure of real activity is? I would say they’re low, but it’s not as low as you might think.

Ian:

I think that’s super interesting, actually. You’ve peeled off the high-frequency traders, you maybe peeled off some of the people that were really just in it to wash trade or arbitrage certain collections. And you’ve got the people who are actually in it for the art or in it for the collectible experience, and they’re still holding onto their NFTs. That’s exciting.

Well, Kim, this has been absolutely fantastic. It’s always a pleasure to have you on the show. Thanks for sharing all the knowledge, and we’ll probably have you back again soon to talk Crypto Crime Report once we get into that publication cycle.

Kim:

Yeah. Thanks for having me, and I can’t wait to talk about crime more.

Ian:

All right.

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