Binance and Chainalysis Clash Over How to Measure Illicit Crypto Activity

The latest flashpoint is Binance’s recent claim that illicit trading on major crypto exchanges is almost negligible. Chainalysis, whose data Binance cited, says the conclusion isn’t supported once the full spectrum of activity is included.

The dispute reveals a deeper issue: crypto crime isn’t only a technical challenge. It’s a narrative one.

Binance’s Message: Criminal Flows Are Tiny Compared to Total Volume

When Binance published its breakdown in mid-November, the argument was straightforward: look at transaction volumes across the world’s seven biggest exchanges, isolate the wallets that regulators have formally labeled illicit, and count how much flows directly from those wallets into exchanges.

That calculation produced eye-catching results — between 0.018% and 0.023%. And based on that slice of data, Binance concluded that not only are criminal inflows exceptionally low, but Binance itself has the lowest exposure among the major platforms.

The implication: crypto’s crime problem is dramatically overstated.

Chainalysis Pushes Back — Not Against the Math, but the Method

Chainalysis agrees that the percentage is what Binance says it is. What it disputes is what that percentage actually represents.

The firm says criminals almost never send stolen or ransomware funds straight to a big exchange anymore. Instead, they move them through chains of smaller wallets first so they appear clean before they land on Binance or its competitors. Under Binance’s methodology, those funds are treated as non-illicit.

Chainalysis points out that this indirect laundering route is the dominant one in practice. The firm’s own dataset shows $2.2 billion in crypto stolen last year, of which $1.7 billion ultimately reached exchanges — mostly after being routed through intermediate wallets.

Binance’s metric excludes that entire category.

TRM Labs: Same Data, Same Problem

TRM Labs — the other analytics firm named in Binance’s report — issued its own clarification. The number Binance used came from a private dataset provided only to the exchange, not from TRM’s public reporting. And like Chainalysis, TRM stressed that the figure reflected direct exposure only, so it cannot be used to generalize about total illicit flows.

In short, both forensics firms are aligned: Binance did not lie about the number — it simply chose the narrowest possible definition.

Compliance Politics Lurking in the Background

The dispute lands during a critical moment for Binance. After paying $4.3 billion in penalties and navigating the sentencing and later pardon of Changpeng Zhao, the exchange has been working hard to portray itself as cleaner and more compliant than ever.

The narrative matters. In an industry often judged through headlines rather than audits, the version of “illicit activity” that regulators and the public believe in will shape the direction of policy — and could influence how exchanges compete for legitimacy.

The Real Question the Industry Has to Solve

Crypto crime hasn’t disappeared. But neither has the question of how to measure it. If regulators, analytics firms and exchanges cannot agree on what counts as illicit activity — the first wallet in the chain, or the last — then the debate about crypto crime will continue to be more about perspective than numbers.

Binance and Chainalysis are not arguing over the data. They are arguing over the definition.

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