Following the $1.5 billion Bybit hack—the largest crypto theft to date—the entire crypto industry was forced to take a hard look in the mirror, confronting the critical vulnerabilities it still faces. However, the incident also showed how coordinated the public and private sectors can be—more than $40 million in stolen funds were frozen, with Chainalysis contributing significantly to the effort.
When it comes to data, the reports Chainalysis delivers—especially its annual Crypto Crime Report—have become indispensable resources not only for investigators and regulators but for anyone serious about the future of digital assets. This year’s edition reveals some unpleasant truths we have to accept: illicit cryptocurrency volume is expected to exceed 2023 levels, ransomware and darknet markets are staging a dangerous comeback, and state-affiliated threat actors are becoming bolder and more strategic.
Reports like this shape industry narratives and regulatory direction. That’s why it was such a privilege to speak exclusively with Chainalysis Co-Founder and CEO Jonathan Levin—whose deep insights have earned him multiple invitations to testify before the U.S. Congress—about what these and other numbers really mean.
As someone who has long studied these reports and often cited them in my analyses, hearing directly from Jonathan Levin felt like those data-packed pages had come to life. His voice gave form to the trends, risks, and urgent calls to action that Chainalysis outlines year after year—only this time, the insights offered much-needed clarity and what we as an industry must do next.
In our conversation, he went beyond the numbers—breaking down the real-time response to the Bybit hack, explaining how AI is simultaneously a threat and a solution, and forecasting how crypto will evolve in 2025 and beyond.
$1.5B Bybit Hack Shows Industry’s Weakest Links—But Also Its Strength
“This attack once again reminded the industry of the concrete consequences when threat actors identify and exploit vulnerabilities in crypto platforms or their supply chains,” Levin said of the Bybit hack. “But the good news,” he added, “is that a broad array of steps can be taken to prevent such attacks.”
He cited Chainalysis Hexagate as a critical tool in this fight:
“It uses machine learning to provide real-time web3 security solutions that detect and mitigate cyber threats, acts as an independent cosigner and transaction validator to analyze transactions before they are signed. This layer helps detect malicious transactions, flags anomalies, and automatically denies high-risk operations before they are executed.”
Levin also emphasized the importance of combining both Web2 and Web3 best practices.
“Endpoint Detection and Response tools, strict signer communication protocols, and wallet-level policy controls can all help protect crypto businesses from hacks,” he explained.
Despite the severity of the Bybit attack, Levin pointed out the role blockchain transparency plays in fighting back.
“Every transaction is recorded on a public ledger, enabling authorities and cybersecurity firms to trace and monitor illicit activities in real time,” he said.
“Already, we’ve worked with contacts in the industry to help freeze more than $40 million in funds stolen from Bybit and continue to collaborate with public and private sector organizations to seize as much as possible.”
He noted the cooperative spirit shown by Bybit and the broader ecosystem:
“The swift response from Bybit, including its assurance to cover customer losses and its engagement with blockchain forensic experts, exemplifies the industry’s commitment to mutual support and resilience. By uniting resources and intelligence, the crypto community can strengthen its defenses against such sophisticated cyberattacks and work toward a more secure digital financial environment.”
Can DEXs Still Be Decentralized and Secure?
Decentralized exchanges allow users to swap assets anonymously, creating a lot of headache for law enforcement, but according to Levin, that doesn’t mean they’re beyond accountability.
“Managing risk and curbing illicit activity going through a DEX can be approached in multiple ways—from the DEX itself as well as from authorities working to reduce illicit activity,” he explained.
On the DEX side, he said, implementing address screening to identify and potentially block illicit addresses from interacting on the platform is an effective way to prevent illicit activity.
Jonathan Levin also pointed to Chainalysis’ ecosystem monitoring tools, which help DEXs assess a token’s overall risk exposure—something centralized exchanges typically address through transaction monitoring and compliance teams.
“This is different compared to how a centralized exchange might use transaction monitoring,” he said. “A DEX can monitor for activity that has occurred and work with the broader ecosystem to take action against illicit activity.”
If a DEX detects illicit actors using its platform, Levin explained, it can reach out to asset issuers to freeze funds or collaborate with law enforcement as they trace money through KYC-compliant off-ramps.
Beyond what DEXs can do themselves, Levin emphasized that Chainalysis’ tools can help in the balance of decentralization and accountability.
“Helping investigators trace funds through DEXs is a core capability for Chainalysis,” he said, adding that Chainalysis tools like Transaction Explorer help investigators trace stolen funds automatically across DEXs.
“This helps the law enforcement community to follow funds to off-ramps that might help either freeze or seize them,” he explained.
Stablecoins Need Global Guardrails To Unlock Institutional Trust
According to Levin, increased institutional adoption hinges on creating a more regulated environment for stablecoins, pointing to the EU’s MiCA framework and ongoing U.S. stablecoin legislation as steps in the right direction.
“Transaction volumes show that stablecoins are currently the biggest use case for crypto assets, which makes sense given that they not only grant access to essential financial services and enable economic participation, but also offer a consistent store of value, particularly for regions with economic instability and local currency devaluation,” he said. “However, work still needs to be done to ensure these can be used safely across the globe.”
He noted that what makes stablecoins unique is their ability for issuers to collaborate with government authorities to rapidly freeze the assets involved in illicit activities when needed.
“A critical point of discussion surrounds the regulatory requirements that should be imposed on stablecoin issuers to curb illicit activities using this freezing capability,” he said.
Some jurisdictions, including the EU and the U.S. are already making progress:
“The EU, for instance, introduced the MiCA stablecoin regime in June 2024, which provides robust guidelines for issuers to follow to ensure the protection of end users. Additionally, the U.S. is actively debating legislation that would create a federal regulatory framework for stablecoins. Other regions should also be working on their own guidelines, and beyond this, we also need to see global collaboration from regulatory bodies on mapping out how stablecoins will interact cross-border.”
Levin also stressed that regulatory clarity is needed not just for stablecoins, but for crypto market structures more broadly:
“Again, the EU is leading in this department with MiCA, but we also need to see other regions follow suit. Retail participants are still being left vulnerable to illicit actors. Additionally, the lack of clear guidelines is leaving businesses confused as to the services they can and can’t offer. Only once this is addressed will we see better trust in the ecosystem.”
AI Is Driving the Next Wave of Crypto Innovation—and Criminal Tactics
Levin believes the convergence of AI and crypto is not just likely—it’s already underway.
“AI is continuing to be white hot at the moment, with so much money going into the technology,” he said. “We can expect to see an intersection between this and crypto, the other white hot technology everyone’s focused on. People will begin building cool applications for AI using crypto wallets and vice versa, with AI agents within crypto wallets likely an inevitability. As these technologies intersect, we will only see interest in both continue to grow.”
At the same time, Levin warned that AI is also supercharging the threat landscape—especially for scams, which are typically correlated with bull markets—and 2024 has been no exception.
“When the crypto market is performing well, it’s typical to see an increase in fraudulent activity—investment scams, Ponzi schemes, ICOs, approval phishing, and the use of drainers,” he said. “The increased loot on offer attracts heightened attention towards the space from illicit actors.”
While law enforcement has made meaningful progress, particularly through blockchain analysis used to disrupt criminal operations in 2024, Chainalysis’ CEO warned that the arms race is intensifying due to AI.
“As AI grows in sophistication, fraud will become more scalable and affordable to conduct—scammers can already easily produce high-fidelity fake content and identities, deceiving users across social media and communication platforms to authorize payments under false pretenses,” he said.
But Levin sees hope in turning the same tools used by criminals into weapons for defense:
“To help overcome this issue, LA and the government can make use of the very same technology that illicit actors are using. AI solutions in tandem with human efforts, for example, can be used to expedite the process of tracking and preventing illicit actors.”
He pointed to Chainalysis’ acquisition of Alterya as one example of this approach already in motion.
“The company has been working with exchanges and financial institutions to monitor more than $8 billion in transactions per month across crypto and fiat rails to protect 100 million end users from this growing threat,” he said. “As AI continues to influence the implementation of scams, tools such as Alterya can help enforcers stay across the threat landscape and minimize the damages caused.”
Public–Private Intelligence Networks Are the Only Way to Win
When asked how public–private collaboration can be strengthened to disrupt global scam networks and better protect victims, Levin stressed the strategic role of blockchain data and intelligence sharing.
“At a strategic level, as governments grapple with an increase in crime, the public sector needs to re-assess how it can effectively disrupt illicit activity,” he said.
Responding to one-off reports of crime is slow and time-consuming. Instead, he believes blockchain investigations should be used to analyze how these crime groups both steal and launder the proceeds of crime.
“Blockchain investigations provide opportunities to develop intelligence, secure evidence and seize assets. But, importantly, they can help better inform resource allocation, ensuring that investigators target the highest harm, highest impact crime groups,” Levin explained.
Still, he was clear that the public sector cannot handle this alone:
“This isn’t something the public sector can do alone—collaboration with the private sector is essential. Effective partnerships between cryptocurrency exchanges and LE and the government are vital.”
Levin mentioned the Chainalysis initiative Operation Spincaster as a model for how these relationships can work.
“Initiatives such as Operation Spincaster should be focused on building lasting relationships between public and private players, ensuring that law enforcement and government agencies can work with these entities to better manage risk on their platform, share intelligence and prevent crime,” he explained.
Crypto in 2025: Mass Adoption, Political Signals, and the Security Arms Race
Looking ahead, Levin sees 2025 as a milestone year for crypto adoption, with payment-related use cases and stablecoins leading the way.
“2025 is set to be one of the most interesting years for the crypto industry so far. Payment-related use cases of crypto and stablecoin adoption are going to be particularly exciting spaces to watch. While this is starting from a relatively nascent place, we can expect to see really quick growth on both fronts,” he said.
Levin also highlighted the accelerating adoption of crypto, noting that it’s clearly on a path to becoming part of the mainstream mindset.
“Crypto ETFs are growing, with Solana, XRP and other altcoins likely soon to be part of this offering, banks are starting to offer custody services, and on-chain transaction volumes are rising worldwide, particularly in countries with weaker fiat currencies.”
He noted that even political events are intertwining with crypto markets.
“Bitcoin was the Trump trade as we saw prices grow following the election, with Polymarket also being a big part of the election cycle this year,” he said. “Speaking of Polymarket, this is a good example of a new application of crypto beyond just holding tokens—something that will continue to evolve.”
On the crime and security front, Levin sees a shift from reaction to prevention.
“As blockchain investigation capabilities grow, we can expect to see an evolution from reactive investigations of illicit activity to preventative analysis,” he said. “This is something we’re already taking major steps towards at Chainalysis with our recent acquisition of Hexagate, a web3 security solution that detects and tackles threats in real-time.”
And perhaps most critically, he notes:
“These days, almost every form of crime—whether it’s organized crime, scams, fraud, and even human trafficking—has a crypto component. This is because illicit actors have realized they can move funds quickly, globally, and often with a perceived sense of anonymity. As a result, LE needs to treat every crime as potentially involving cryptocurrency and to leverage blockchain data to inform and accelerate their investigations.“
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