Sanctioned entities fueled $16 billion in cryptocurrency activity last year, report says

Sanctioned entities and jurisdictions were responsible for nearly $16 billion in cryptocurrency activity last year, driven in part by a resurgence of activity in the mixing service Tornado Cash and a spike in the use of crypto in Iran. 

In a report released on Wednesday, blockchain analytics firm Chainalysis said that despite sanctions against Tornado Cash in 2022 by the U.S. Treasury’s Office of Foreign Assets Control, the “core infrastructure of the platform has proven difficult to shut down.” 

Separately, individual Iranians moved more money out of the country’s beleaguered financial system and into cryptocurrency in 2024 than ever before, the report said. 

Inflows into a mixer

Tornado Cash pools together and mixes funds, making them harder to trace. Co-founders Roman Semenov and Roman Storm have each been indicted in the U.S. on money laundering charges, while another co-founder, Alexey Pertsev, was sentenced in the Netherlands to 64 months in prison. 

Overall, OFAC issued 13 sanctions designations in 2024 that included cryptocurrency addresses, the second-highest amount in the last seven years.

Despite the wave of enforcement actions intended to clamp down on the mixing service, inflows to the platform more than doubled year-on-year in 2024. The amount of cryptocurrency flowing into the mixer is down overall since sanctions were put in place — including a 90% drop immediately afterwards — but Tornado Cash still processed about $100 million each month last year. 

The founders and some other crypto advocates say the service serves a legitimate privacy function but its anonymizing service has also made it a magnet for cybercriminals laundering digital assets. In 2024, Chainalysis said, nearly a quarter of inflows into the platform were stolen — including $145 million in Ethereum stolen from the Heco Chain blockchain protocol, allegedly by North Korean hackers. 

“While the transparency of blockchain enables authorities to track illicit flows, regulators have limited power to actually dismantle decentralized infrastructure,” Chainalysis said.

‘Alternative financial system’ for Iran

Under the weight of sanctions attempting to cut off Iranian access to the Western banking sector, Iran showed a remarkable turn to digital currencies in 2024. This is likely due to a cratering of the rial, which has lost 90% of its value since sanctions were imposed in 2018, as well as instability throughout the region. 

For example, in early April 2024, Israel’s bombing of the Iranian Embassy in Damascus triggered speculation that Tehran would retaliate. That tense situation likely triggered a spike in outflows of cryptocurrency from Iran, first on April 9 and then on April 14, the day after Iranian-backed militant groups launched hundreds of drones at Israel. Such spikes in trading activity occurred throughout the year in response to the chaotic geopolitical situation. 

Outflows of cryptocurrency from Iran reached $4.18 billion in 2024, up about 70% year-over-year.  

“A closer examination of these outflows suggests they are not necessarily driven by illicit finance or state-sponsored activity, but rather by Iranian citizens’ deepening distrust in the government and a pressing need to move funds out of the country,” Chainalysis said. 

Digital currencies represent “an alternative financial system” for Iranians trying to “safeguard wealth and circumvent financial restrictions.”

Despite the rise in cryptocurrency activity in Iran, however, there are signs that the screws are tightening in the digital realm as well. The number of exchanges doing business with Iranian services is steadily falling and has dropped by about 23% since 2022 to just over 200 exchanges. 

“From a regulatory standpoint, the distinction between state-directed sanctions evasion and individual use has little impact, as broad sanctions prohibit nearly all financial interactions between U.S. persons and entities in sanctioned jurisdictions, regardless of intent,” Chainalysis said. “However … it is important to recognize that individuals and businesses often turn to crypto without illicit intent, demonstrating the tension between financial enforcement and humanitarian considerations.”

Overall for 2024, the global volume of cryptocurrency transactions grew to over $10.6 trillion, "up 56% since 2023," according to a blog post from blockchain intelligence company TRM Labs.

Trading volume that it labels as illicit appeared to drop to $45 billion overall, "down 24% since 2023." The 2024 total represented 0.4% of overall volume, down 0.9% from 2023, TRM Labs said.