July2022

TheChainalysis2022StateofCryptocurrencyInvestigationsSurvey

ThecryptocurrencyoutlookfortheNorthAmericanpublicsector

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|ExecutiveSummary2

Executivesummary

Cryptocurrencypresentsuniquechallengestothepublicsector.Onthelawenforcementside,cryptocurrencyistouchingallformsofcrime:drugs,theft,fraud,moneylaundering—younameit.Butcryptocurrencycasesdiffersignificantlyfromthoseinvolvingtraditionalfinance,andrequirenewtoolsandmethodologiestosolve.Fromregulators’perspective,cryptocurrencyhasgrownfromanichehobbytoatrillion-dollarassetclassinunderadecade,bringingwithitconcernsoverconsumerprotection,marketmanipulation,AML/CTFenforcement,andmore.ThoseproblemsareonereasonChainalysisexists.Weworkwiththepublicsectortomakethecomplexityofcryptocurrencysimple,andhelpagenciesachievetheirobjectiveswithcryptoaseasilyastheycanwithfiat–ifnotmoreso.

Buteverysooften,weneedatemperaturechecktoconfirmwe’reontherighttrack.That’swhy,forthefirsttime,wepolledthepublicsectortobetterunderstandtheiroutlookoncryptocur-rency:thesuccesses,thechallenges,andwhattheyneedtobecomemoreeffective.Here’saquicksummaryofourkeyfindings:

?Publicsectoremployeeslikecryptocurrencybutseethedownsidestoo.Themajorityofourrespondentssaycryptocurrencywilladvanceourfinancialsysteminapositiveway,butalsoacknowledgethatitplaysaroleinmanyoftheircriminalinvestigations.

?Cryptocurrencyspansallformsofcriminalactivity.Atboththefederalandstate&locallevels,respondentstoldusthatcryptocurrencyisprevalentinavarietyofcrimetypes,includingnarcotics,fraud,theft,andcybercrime.

?Blockchainanalysistoolsmustprovideaccuratedataandtransactionvisualizationaboveallelse.Respondentspointedtoaccurate,reliableblockchaindata,andsimplevisualizationasthemostimportantcomponentsofanyblockchainanalysistooltheyuse.Thesefunctionalitiesmatterforbothcompletinginvestigationsandforensuringpositiveresultsincourt.

?Trainingmatters.Respondentsratedeffectivetrainingprogramsasanothercrucialrequirementforanycryptocurrencyinvestigativetooltheypurchase.

?Publicsectoremployeesneedmoreresources.74%ofourrespondentssaidemployeesattheiragencyaren’tcurrentlywell-equippedtoinvestigatecryptocurrency-relatedcrime.

Keepreadingforourfullbreakdownofthesurveyresults.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|Methodology3

Yes

No

Methodology

WeranthissurveyforaperiodoffivemonthsanddistributedittorelevantpublicsectoremployeesintheUnitedStatesandCanadainthefollowingways:

?EmailstoChainalysiscustomers,partners,andnon-customercontacts

?Emailstocustomersof

partnercompanies

alsoservingthepublicsector

?Emailstomembersofnon-profit,publicsectorassociationsChainalysishaspartneredwith.

Throughallofthesechannels,oursurveyachieveda6.8%responserate,foratotalof300respondentsacross183agencies.Pleasekeepinmindthoughthatsincerespondentsweren’trequiredtoanswereveryquestion,eachquestionhasadifferentnumberofresponses.

AreyouacurrentChainalysiscustomer?

0

50

100

150

Thoserespondentsinclude146currentChainalysiscustomersand124non-customers,while30respondentsindicatedthattheypreferrednottoanswer.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|RespondentProfile4

AnalystDirector

ForensicExaminer

IprefernottoanswerInvestigator

Manager/SeniorManagerOther

ProgramManager

Prosecutor

Respondentprofile

Whattypeofagencydoyouwork

for?

FederalCivilianAgency

FederalLawEnforcement

FederalRegulatory/TaxAuthority

Military/Defense

NationalSecurity

State&LocalLawEnforcement

State&LocalRegulatory/

TaxAuthority

0255075100

Lawenforcementprofessionalsmakeupthebulkofthissurvey.52%ofrespondentshailfromfederallawenforcementagencies,while30%workinstate&locallawenforcement.

Whattypeofjobdoyouhave?

80

0204060

Intermsofjobroles,40%ofrespondentsdescribedthemselvesasinvestigators,and28%asanalysts.Managersandforensicexaminerswerealsowell-represented,especiallyifweassumethattherolesofrespondentswhoskippedthisquestionwouldbreakdowninsimilarproportions.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|RespondentProfile5

Howlonghaveyouworkedinyour

field?

Howlonghaveyouworkedinyourcurrentagency?

Under1Year

1–2Years

2–5Years

5–10Years10–20Years

20+Years

0204060

80

Under1Year

1–2Years

2–5Years

5–10Years10–20Years

20+Years

0204060

80

Mostofourrespondentshaveworkedintheirfieldfortenyearsormore,butwealsoseeasizablenumberofrespondentsearlierintheircareers.

Inwhichstate,province,orterritorydoyoucurrentlyreside?

Navy=U.S.states;Yellow=Canadianprovincesandterritories

3

2

6

13

3

2

2

1

3

3

9

4

2

1

15

3

1

3

1

9

9

8(MD) 3(DC)

2

1

2

1

2

2

4

5

3

2

3

1

OurrespondentshailfromallovertheUnitedStatesandCanada,butwesawespeciallyheavyparticipationfromemployeesresidinginCalifornia,Maryland,NewYork,Virginia,andOntario—notallthatsurprisinggiventheirpopulationsizesrelativetootherstatesandprovinces.Thespreadofrespondentsisinlinewithourobservationthatascryptocurrencyusagegrows,it’sbecomingprevalentinallareasofNorthAmericaasopposedtoafewconcentratedones,whichmeansthatlawenforcementandregulatorsacrosstheregionmustbepreparedtoaddressit.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|ThoughtsandAttitudes6

Numberofrespondents

Numberofrespondents

Numberofrespondents

Numberofrespondents

Numberofrespondents

Numberofrespondents

100

50

0

150

100

50

0

100

50

0

250

200

150

100

50

0

250

200

150

100

50

0

Respondents’currentthoughtsandattitudestowardcryptocurrency

Below,weaskedrespondentstorateonafive-pointscaletheirlevelofagreementwithaseriesofstatementsoncryptocurrency’slegitimacyandrelevancetotheirinvestigations.

Howwouldyoudescribeyourpersonalperceptionofcryptocurrency?

Ibelievecryptocurrencyismainlyusedbycriminals

andothermaliciousactors

250

Ibelievecryptocurrencywilladvanceourfinancialsysteminapositiveway

250

200

150

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

200

150

100

50

0

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

Ibelievecryptocurrencywillbecomewidelyadoptedamongstthegeneralpopulation

250

Ibelievethatcryptocurrencyisavalidandtrustworthyformofcurrency

250

200

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

200

150

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

Ibelievethatcryptocurrencyissomethingthatmyagencyshouldinvestresourcesintoinvestigating

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

Ibelievethatcryptocurrencymatterstomyinvestigations

StronglySlightlyNoopinionSlightlyagreeStronglyagree

disagreedisagree

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|ThoughtsandAttitudes7

Numberofrespondents

No

Yes

No

Yes

Theresultstellaninterestingstory.Respondentsoverwhelminglysaidthatcryptocurrencyisrelevanttotheirinvestigationsandthattheiragenciesshouldinvestresourcesintocrypto-currencyinvestigations.However,despiteacknowledgingcryptocurrency’sroleinthecriminalactivitytheyinvestigate,respondentsdon’ttakeanegativeviewofcryptocurrency–farfromit.Themajorityofrespondentsagreethatcryptocurrencywillpositivelyadvanceourfinancialsystemanddisagreewiththenotionthatcryptocurrencyisprimarilyusedbycriminals.

Thatpositivesentimentaroundcryptocurrencybalancedwiththeunderstandingthatcryptocurrency-relatedcrimecallsforinvestigatoryresourcesalignswith

ourfindings

oncryptocurrency-basedcrime:Thegrowthoflegitimatecryptocurrencyusagevastlyoutstripsthegrowthofcriminalusage,butevenso,criminalusagerepresentsahighenoughdollarfigurethatthepublicsectormustbepreparedtoinvestigate.

Howwouldyoudescribeyourlevelofunderstandingofcryptocurrency?

Rateonascalefrom0to100fromnotknowledgeabletoextremelyknowledgeable.

30

20

10

0

0235679101315161718202123242526282930313233353738394041444546474950515254555657585960616364656667686970717273747576778082858890929394959899100

Onascaleof0to100,respondentsonaverageratedtheirlevelofunderstandingofcrypto-currencyat58.Whilemostrespondentsputthemselvesontheupperhalfofthescale,thataveragesuggeststhere’sstillmuchworktobedoneoncryptocurrencyeducationforthepublicsector—andaswe’llexplorelater,theprivatesectorhasahugeroletoplayinprovidingthateducation.

Doyouhavededicatedinvestigators/analyststhatspecializeincryptocurrencyinvestigations?

0

100

50

Areyouusingcryptocurrencyforensics/analyticstoolstoday?

0

50

150

150

100

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|ThoughtsandAttitudes8

Themajorityofrespondentssaidthattheiragencyhasinvestigatorsandanalystsspecializingincryptocurrencyinvestigations.However,thesurveyalsoindicatedthatmanyagenciesaren’tusingspecializedtoolsforthoseinvestigations.Whileit’sgoodnewsthatagenciesarededi-catingstafftocryptocurrencyinvestigations,thosestaffaren’tinthebestpositiontosucceedwithoutblockchainanalysistools.

Agreeordisagree:Theemployeesatmyagencyarewell-equippedtoinvestigatecryptocurrency-relatedcrime.

Agree

25.6%

Disagree

74.4%

Whileamajorityofrespondentsreportthattheiragencyemploysbothspecializedstaffandtoolsforcryptocurrencyinvestigations,theyalsoseemtothinkthoseeffortsaren’tenough.

74%saidthattheiragencyisn’twell-equippedtoinvestigatecryptocurrency-relatedcrime.

That’sahugeproblemnotjusttoday,butinthefutureaswell.Cryptocurrencyisarapidlychangingindustry—injustthelasttwoyears,forinstance,we’veseena

hugeshift

inactivityfromcentralizedservicestoDeFiprotocols,wheretransactionsaremorecomplexanddifficulttoinvestigate—soifagenciesaren’tbecomingproficientincryptocurrencyinvestigationsnow,theirknowledgegapscouldcompound,causingthemtofallfurtherbehindthecriminalsexploitingcryptocurrencyregularly.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|ThoughtsandAttitudes9

QUOTESFROMRESPONDENTS

Whatcanyouragencydotohelpyoubetter

investigatecryptocurrency-basedcrime?

“Asinahostofotherareas,weneedmoretrained,skilled

peoplewhomwecannotaffordtohire.”

“Hookusupwithtraining.”

“Hostmoreconferences/roundtablesaroundcryptocurrency-relatedcrimeswherebestpracticescanbesharedinappropriatesettings.

togethertoaffordtools.”

“Coordinatewithotheragencies/regionstopoolfunds

“Acceptinnovationandtheneedfortechnology,make

investmentsintools/investigatorswhereappropriate,and

coordinatewithotheragenciestoaddressjurisdiction

problems.”

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|CryptocurrencyInvestigationsToday10

Numberofrespondents

Cryptocurrencyinvestigationstoday

Abouthowmanycases,leads,and/ortipsdoyouseeayearthatincludeacryptocurrencytransaction?

60

40

20

0

012-55-1010-2020-5050-100100+

Casesperyear

Weseeawiderangeinthenumberofcryptocurrency-relatedcasesrespondentsseeonthejob.However,overhalfsaytheyseemorethantensuchcasesperyear,while38%saidmorethan20,and14%saidmorethan100.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|CryptocurrencyInvestigationsToday11

Whatcrimetypesareyouseeinginvolvingcryptocurrency?

Fraud(Wire,Investment)Scams(Romance,Bitcoin,ATM)Drugs

Cybercrime

Fraud(Benefits,COVID-19)RansomwareTheft

CSAMMaterialKidnappingHomicide

050100150

200

Thoseinvestigationsspanseveraldifferentformsofcrime,withvarioustypesof

scamsandfraud

leadingtheway.

Drugs

,

cybercrime

,andofcourse,

ransomware

,arealsowell-represented.

Federalagencies:Whatcrimetypesareyouseeinginvolvingcryptocurrency?

Theft

CSAM

7.5%

2.7%

Cybercrime

Scams

12.1%

16.2%

Drugs

16.4%

Ransomware

11.9%

Kidnapping

1.3%

Fraud(Benefits,COVID-19)

Homicide

13.2%

1.3%

Fraud(Wire,Investment)

17.3%

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|CryptocurrencyInvestigationsToday12

State&local:Whatcrimetypesareyouseeinginvolvingcryptocurrency?

Theft

CSAM

12.2%

3.6%

Cybercrime

13.1%

Scams

18.5%

Drugs

11.7%

Ransomware

Fraud(Benefits,COVID-19)

11.3%

10.4%

Kidnapping

1.4%

Fraud(Wire,Investment)

Homicide

17.1%

0.9%

Interestingly,thebreakdownofcrimetypesinvolvingcryptocurrencydoesn’tchangemuchbetweenthefederalandstate&locallevels.Theonlydifferencesarethatweseeslightlymoredrugandbenefitsfraudcasesinvolvingcryptocurrencyatthefederallevel,comparedtomoretheftatthestate&locallevel.

QUOTESFROMRESPONDENTS

Tellusaboutcrimetypesinvolvingcryptocurrencythatyou’reseeinginyourinvestigations.

“Moneylaundering.”

“CivilFraudrelatingtoincometaxmatters.”

“I’mseeingsome[bot]generatedmalwareincidentsthattargetcustodialwallets(ieTrezor)atthetimeofoffboardingcryptotocoldstorage.”

“Rugpulls,smartcontractscams.”

“Iworktaxinvestigations.Cryptoisthenewtoy/shinyobjectforsome[ofthepeoplewe’reinvestigating].”

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|CryptocurrencyInvestigationsToday13

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|BlockchainAnalysisTools14

Functionality

Whatdorespondentswantfromtheirblockchainanalysistools?

Weprovidedrespondentswithalistof15functionalitiesforblockchainanalysistools,andaskedthemtoratetheimportanceofeachonafive-pointscale.Thegraphbelowrankseachfunctionality’srelativeimportancebasedonaweightedmeasurementofthoseresponses.

Whichareyourtoprequirementsfromacryptocurrencyanalyticssolutionsvendor?

Respondentswereaskedtorateeachfunctionality’simportanceonafivepointscale.Thisgraphassignseachfunctionalityanimportancescorebasedonaweightingofthoserankings.

Accuracyandreliabilityofdata,enablingitsuseaslegalevidence

Datavisualizationcapabilitiesandeaseofuse

Trainingcoursestogainknowledgeonhowtousethe

solutionandthelatesttechnologiesSupportforallcoinsandotherblockchaintransactions(NFTs)

Caseprioritizationsolutions(geolocationinformation,addressfiltering,timestampfiltering) Accesstoacommunityofexpertstoshareknowledgeandassistwithcases

SpeedofdataaccessAvailabilityofrelevantopen-sourceintelligenceinformation

Dedicatedcustomersupportspecialist

Speedofinnovationandthefrequencyofproduct/solutionupdates

Collaborationfeaturestomanagecasesacrossseveralteams

Easeofintegrationcapabilitieswithothersolutions(API)

Globalpresencewith24/7support

CollaborationopportunitieswiththirdpartiesFlexiblesolutiondeployment(SaaS,On-Premiseorhybrid)

0

400

200

Importance

ranking

600

Accuracyandreliabilityofdatawereratedasbyfarthemostimportantfunctionality,andit’snothardtoseewhy—usersneedtobeabletotrustthattheaddressestheyanalyzeareattributedtothecorrectorganizationsandservicesinordertobothcarryoutinvestigationsandusetheirfindingsincourt.Chainalysisrecognizestheimportanceofaccurateblockchaindata,andwithadeterministicprocessforattributingaddressestorealworldentities,we’veworkedsince2014tobuildtheworld’smosttrusted,comprehensive

blockchaindataset

.

Datavisualizationwasalsohighly-ranked.Infact,inourfollow-upquestions,themajorityofrespondentssaidvisualrepresentationsofblockchainevidencewereextremelyvaluableforinvestigationsandextremelyeffectivefortellinganeffectivestorytoajudgeorjury.

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|BlockchainAnalysisTools15

Numberofrespondents

3

4

7

10

15

16

21

23

40

42

45

47

49

50

51

52

53

55

59

60

61

65

67

69

70

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

Numberofrespondents

1

8

18

20

26

32

34

44

45

46

47

49

50

53

55

57

58

59

60

61

62

64

65

66

67

70

73

75

76

77

78

79

80

81

82

84

85

86

87

89

90

91

92

93

94

95

96

97

98

99

100

Howvaluablearevisualdepictionsofcryptocurrencyevidenceinaninvestigation?

Rateonascaleof100fromnotvaluabletoextremelyvaluable

150

100

50

0

Dovisualizationsofcryptocurrencyevidencetellaneffectivestorytoajudgeand/orjury?

Rateonascaleof100fromnoteffectivelytoextremelyeffectively

150

100

50

0

Respondentsprovidedseveralquotesontheimportanceofvisualrepresentationsofblockchaindata,afewofwhichweprovidebelow:

“Itspeedsuptheabilitytoseethepathofthemoney,ie:followthemoney.”

“[Chainalysis’visualrepresentations]allowyourbraintoprocessthecomplexandoftenveryoverwhelmingalphanumericaladdresschainsandfractionalamountsofvarioustransactionsalmostinstantaneously…”

“IusethevisualdepictionsinyourtooltoshowtheflowofcryptocurrencyandtobolstermyinvestigativetheorywhenIpitchacasetotheUSAttorney’sOffice.”

Respondentsalsoemphasizedtheimportanceoftrainingcoursesonhowtouseblockchainanalysistools.Onerespondentputitwellwhenaskedtoelaborateonwhattheprivatesectorcouldprovidetosupporttheirefforts:

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|BlockchainAnalysisTools16

“Trainingtrainingtraining.Maybeevenoccasionalopportunitiestopractice.Provideawallettotraceandaskafewquestionsaboutit.Nothingstrenuous-justanoptionalprojectforoursparetime.”

YoucanlearnmoreaboutChainalysistrainingcourses

here

,whichcoverbothourtoolsandcryptocurrencyinvestigativemethodsgenerally.Wealsojustlaunchedthe

ChainalysisAcademy

,afree,publicresourcewithself-pacedcoursesbuiltbyourtrainingteam.

HowChainalysisdelivers

ThesurveyshowsthatrespondentswhoadoptChainalysisgetpositiveresultsintheircrypto-currencyinvestigations.

Estimatedcryptocurrencyinvestigationdurationbyagencytypeandrole

FederalLawEnforcement

State&LocalLawEnforcement

12+Months

10?12Months

7?9Months

4?6Months

2?3Months

1Month

NotusingablockchainanalysistoolChainalysisusers

12+Months

10?12Months

7?9Months

4?6Months

2?3Months

1Month

NotusingablockchainanalysistoolChainalysisusers

Analyst

Investigator

12+Months

10?12Months

7?9Months

4?6Months

2?3Months

1Month

12+Months

10?12Months

7?9Months

4?6Months

2?3Months

1Month

NotusingablockchainanalysistoolChainalysisusersNotusingablockchainanalysistoolChainalysisusers

TheChainalysisStateofCryptocurrencyInvestigationsSurvey|BlockchainAnalysisTools17

Howconfidentareyouatbeingabletoinvestigatecryptocurrency?relatedcrime?

Acrossbothagencytypesandjobroles,Chainalysisusersreportshorterinvestigationdurationsforcasesinvolvingcryptocurrencycomparedtorespondentsnotusingablockchainanalysistool.

RespondentsalsofeelthatChainalysishelpsthembetterconverttheirknowledgeofcrypto-currencyintoactionandtangibleresultsininvestigations.Weexaminedthisbychartingusers’self-reportedunderstandingofcryptocurrencyagainsttheirconfidenceintheirabilitytosolvecryptocurrency-basedcrimeforbothChainalysisusersandrespondentsnotcurrentlyusingablockchainanalysistool.

Self-reportedcryptocurrencyknowledgevs.Confidenceininvestigatingcryptocurrency-relatedcrimeforChainalysisusersandnon-users

Notusingablockchainanalysistool

Chainalysisusers

100

75

50

25

0

0255075100

Howwouldyoudescribeyourlevelofunderstandingofcryptocurrency?

Thegraphshowsthatrespondentsnotusingablockchainanalysistoolfeelcomparativelylessconfidentintheirabilitytoinvestigatecryptocurrency-basedcrimethanChainalysisusers,especiallywhentheyreportastrongunderstandingofcryptocurrency.Inotherwords,Chain-alysishelpsthestrongestcryptocurrencyexpertswithin