The cryptocurrency analytics firm Chainalysis has publicly challenged the recent claims made by Binance regarding illicit cryptocurrency flows. The dispute arose following Binance”s blog post on November 17, which suggested that illicit trading volume on major exchanges was only between 0.018% and 0.023%. This assertion was based on data from Chainalysis and TRM Labs.
In its blog, Binance argued that an analysis of seven major crypto exchanges revealed minimal direct flows from illicit wallets, asserting that it had the lowest exposure in the industry, despite its higher trading volumes. However, Chainalysis contends that this interpretation is misleading, as it only accounts for direct illicit flows while neglecting significant categories such as ransomware, hacked funds, and indirect transfers through intermediary wallets. Chainalysis highlighted that many illicit transactions involve a sequence of transfers, which may not be captured in Binance”s analysis.
Chainalysis pointed out, “If an illicit wallet first sends funds to a personal wallet and then to Binance, this will not show up in the analysis.” The firm emphasized that these “wallet chain” methods are frequently exploited by criminals, yet they can often be traced with appropriate analytical tools. Their data indicated that $2.2 billion in cryptocurrencies stolen through hacks reached $1.7 billion last year.
In light of the criticism, Binance updated its blog post on November 19, clarifying that their analysis was conducted internally using datasets from Chainalysis and TRM Labs, and focused solely on direct exposure. This clarification comes at a time when Binance is striving to enhance its regulatory compliance, having paid $4.3 billion in fines in 2023 for various violations, including anti-money laundering breaches and unauthorized money transfers. The former CEO, Changpeng Zhao, received a four-month prison sentence, later pardoned in October.
TRM Labs, which was also referenced by Binance, echoed Chainalysis”s concerns. Ari Redbord, the company”s global policy director, stated that the 0.018% figure cited by Binance was a limited “snapshot” of the exchange”s exposure as of June 2025, only addressing direct flows. He clarified that this number was not derived from TRM”s publicly available reports but from a dataset specifically provided to Binance, allowing the exchange to interpret and frame it as they see fit.
This controversy highlights the ongoing complexities and challenges surrounding data interpretation in the cryptocurrency space, particularly regarding illicit activities and regulatory compliance.
