The rise of advanced artificial intelligence (AI) systems could enable a whole new breed of cryptocurrency-related crimes in the years ahead, according to Chainalysis, a leading blockchain intelligence company.

At a recent private webinar attended by CryptoNews, Eric Jardine, the Head of Cybercrime Research at Chainalysis, analyzed the growing and declining trends in illicit blockchain activities during 2023. He also offered predictions on the potential tactics criminals might employ by leveraging emerging technologies, especially large language models (LLMs).

"We believe AI will impact various categories of crypto crimes in different ways," Jardine stated. "While AI models could potentially enhance the security of decentralized finance (DeFi) platforms through improved code auditing, the same models could also be misused by bad actors to identify vulnerabilities in smart contracts."

The DeFi sector has been a disproportionate target for cryptocurrency theft, with hackers exploiting code flaws, obtaining private keys, and manipulating prices to steal digital assets. Although formal code audits have become an industry standard, their ability to prevent hacks remains imperfect. The influence of AI on fortifying or compromising smart contracts is uncertain, and its impact could fluctuate over time.

Despite these concerns, the overall volume of stolen DeFi funds decreased from $3.1 billion in 2022 to $1.1 billion in 2023, with the number of incidents dropping from 273 to 172.

AI-Driven Romance Scams – A Growing Menace

Beyond its potential effects on DeFi, Jardine warned that AI could exacerbate the already troubling issue of "romance scams," also known as "pig butchering" scams. These scams involve establishing seemingly innocent contacts that gradually evolve into fabricated relationships, which the scammers then exploit for financial gain.

"Romance scams are an area where creative and patient large language models could be devastatingly effective for illicit actors," Jardine noted.

Although the total volume of crypto-related scams declined from $6.5 billion in 2022 to $4.6 billion in 2023, revenue from romance scams in the cryptocurrency space nearly doubled during the same period. The average size of a romance scam payment is $4,593, but victims often end up paying significantly more due to the recurring nature of such scams.

Despite these concerns, illicit activity accounted for only 0.34% of all cryptocurrency transactions in 2023, according to Chainalysis' data.

As AI capabilities continue to advance, the cryptocurrency industry must remain vigilant and proactively address potential misuse cases to maintain the integrity and security of blockchain networks and applications.