• TRM Labs report reveals TRON hosted 45% of illicit crypto transactions in 2023, with Tether being the top choice for illegal activities.

• Hackers linked to North Korea prefer TRON for laundering stolen funds, highlighting the network’s vulnerability to illicit activities.

In a recent report unveiled by blockchain forensics firm TRM Labs, it was disclosed that TRON, the blockchain network spearheaded by Chinese entrepreneur Justin Sun, will emerge as the leading host of illicit crypto transactions in 2023. The report, titled “The Illicit Crypto Economy,” outlines a significant surge in illicit activities on the TRON network, marking a notable increase from the preceding year.

The report highlights a concerning trend wherein the Tron blockchain has witnessed a surge in illicit transactions, particularly in activities such as drug sales and terrorist financing. Notably, the number of blockchain addresses associated with terrorist financing on Tron, receiving the stablecoin Tether (USDT), dramatically increased by 125% in 2023. Tether remains the preferred stablecoin for criminal activities, according to TRM Labs. 

The data showcased in the TRM Labs report points to a substantial concentration of “dirty crypto” activities on the TRON blockchain network, accounting for a staggering 45% of all illicit transactions in 2023. Moreover, this finding signifies a notable escalation from the previous year, where TRON accounted for 41% of such activities. Ethereum trailed behind at 24%, with Bitcoin registering at 18%.

Factors driving Tron’s popularity

Several factors contribute to Tron’s growing popularity among illicit actors. One notable factor is its low transaction fees and high speed, making it an attractive option for laundering funds quickly and inexpensively. Additionally, the availability of stablecoins like USDT on the Tron blockchain further facilitates illicit activities, with USDT being the currency of choice for terrorist financing entities, as per the report.

Tron and its founder, Justin Sun, have been embroiled in legal challenges and controversies. Last year, the US Securities and Exchange Commission (SEC) filed charges against Sun and his companies, including Tron Foundation, for alleged violations related to the unregistered offer and sale of crypto asset securities. Additionally, the SEC also accused them of fraudulently manipulating the secondary market of TRX through wash trading.

Impact of government enforcement actions

Furthermore, the report notes a decline in total illicit funds within the crypto ecosystem attributed to intensified enforcement actions by governments worldwide. The increased number of crypto-related entities and individuals sanctioned by the US government also decreased illicit volume. According to TRM Labs, the proportion of total illicit funds decreased by 9% in 2023, with the total volume decreasing by one-third.

In response to risk management considerations, Circle, the operator of the world’s second-largest stablecoin USDC, announced last month that it would discontinue support for the Tron blockchain. This move reflects growing concerns within the industry regarding Tron’s involvement in facilitating illicit activities and underscores the need for stricter regulatory measures to curb such practices.

Additionally, due to the pervasive use of Tether in illicit transactions, the issuer of USDT has reaffirmed its commitment to adhering to anti-money laundering (AML) regulations. Tether dedicates itself to implementing robust know-your-customer (KYC) procedures and ensuring regulatory compliance. Collaboration with U.S. governmental agencies, including the Internal Revenue Service (IRS) and the Federal Bureau of Investigation (FBI), has led to the freezing of numerous crypto wallets associated with illicit activities.

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