Crypto-based crime outpaced by total market’s growth in 2021

Crypto-based Crime
Fin is an editor at TechForge Media and University of Bristol graduate. He wields an impressive knowledge of the latest technologies and has interviewed leading industry figures from companies like CBS, Rakuten, and Spotify. You can follow his Twitter @FinStrathern or connect with him at https://www.linkedin.com/in/finstrathern/.

Crypto-based crime hit an all-time high in 2021, but the growth of the digital assets market as a whole far surpassed the rise in illicit activity.

A record $14 billion (£10.4bn) flooded into crypto wallets with criminal associations in 2021, more than doubling from the previous year, according to blockchain analytics firm Chainalysis.

Whilst this 79% increase may seem substantial, total market transaction volume grew by 567% from 2020’s totals. This leaves crypto-based crime’s relative share of the market at an all-time low of 0.15%.

Chainalysis pointed out that this share figure is likely to rise over time as the company identifies more wallets associated with illicit activity. Even so, yearly trends suggest that crypto-based crime is becoming a less significant part of the digital asset ecosystem over time.

One factor in this is law enforcement’s ability to tackle crypto-based crime is improving. In October, the FBI hacked ransomware group REvil offline. The following month OFAC sanctioned Chatex, a Russian exchange with strong money laundering ties.

However, as new cryptocurrency markets develop so to do new opportunities for criminals to launder money and steal funds.

“As decentralised finance (DeFi) has continued to grow, so too has its issue with stolen funds,” Chainalysis reported.

From 2020 to 2021, DeFi protocols’ usage for money laundering grew by a staggering 1,964%.

Despite crypto-based crime being at a relative all-time low, $14 billion worth of illicit funds still presents a major problem to widescale crypto adoption. It also heightens the likelihood of governmental restrictions being imposed and of course hurts individuals’ finances around the globe.

Fortunately, law enforcement is also getting better at retrieving illicitly obtained cryptocurrency. The IRS seized more than $3.5 billion (£2.6bn) of crypto from non-tax investigations in 2021. Smaller seizures from other agencies worldwide made a substantial contribution too.

Chainalysis will be releasing its 2022 Crypto Crime Report in February, covering topics such as DeFi-related crime, ransomware, crypto-based money laundering, NFT-related fraud, and more.

Click here to sign up for a free email copy of the full report.

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