With the market down, the motivation for criminals to steal people's digital assets dropped significantly last year.

Why it matters: As legislators like Sens. Elizabeth Warren and Roger Marshall seek to associate blockchain technology with cyber crime and money laundering, illicit activity on chain has been dropping, according to a report.

The gyst: Year-end numbers for 2023 from Chainalysis, the most widely known blockchain surveillance firm, show $24.2 billion in illegal activity for the year, or 0.34% of all transaction volume.

Of note: This number will almost certainly go up significantly as the firm learns of more activity confirmed to be criminal on chain from last year.

• The numbers for 2022 nearly doubled with further research in 2023.

Zoom out: That said, the numbers are down both in total and as a share of all volume.

What they're saying: "Scamming is most successful when markets are up, exuberance is high, and people feel like they are missing out on an opportunity to get rich quickly," Chainalysis wrote in its report on the year.

• That was not the sentiment in 2023.

The intrigue: One other factor may be hiding criminal activity volume from blockchain investigators: the changing nature of crime involving crypto assets.

• Chainalysis cites romance scams as the rising trend. These scams are impossible to see with blockchain analysis alone (unlike decentralized finance hacks, which are quite obvious).
• Colloquially known as pig butchering, we talked to someone who was a victim of such an attack.
• "We still believe insights into romance scams in particular suffer from underreporting. We hypothesize that the true damage of scamming is greater than what reporting to the FBI and our on-chain metrics show," the report notes.

Zoom out: As if preying on people's sadness to con them out of their money isn't bad enough, reporting by Bloomberg has convincingly linked the schemes to human trafficking.

Of note: Over 60% of Chainalysis's total, however, comes from funds going to sanctioned entities.

• That said, that doesn't mean all that activity is actually crime. Many sanctioned entities also provide services to normal people in sanctioned countries, but there's no way to know what the proportions are.
• The Wall Street Journal learned about that distinction last fall.