Crimes involving crypto hit a record $14 billion in 2021, new research shows
Crime involving cryptocurrencies hit an all-time high of $14 billion (€12.4 billion) last year, blockchain researcher Chainalysis said Thursday, a record that comes as regulators call for more power in the fast-growing sector.
Crypto received by digital wallet addresses linked to illicit activities including scams, darknet markets and ransomware jumped 80 percent from a year earlier, Chainalysis said in a report.
However, the growth of legitimate trade has far outpaced the growth of crime. The activity represents only 0.15 percent of the total crypto transaction volume, the lowest ever.
Total transaction volume jumped to $15.8 trillion (€13.9 trillion) last year, up more than 550% from 2020 levels.
“Crime is becoming an increasingly smaller part of the cryptocurrency ecosystem,” the report said.
Digital assets, from bitcoin to non-exchangeable tokens, exploded in popularity in 2021 amid the embrace of institutional investors and large corporations.
Newcomers have been drawn to the promise of quick profits touted by crypto proponents, as well as hopes that bitcoin offers a hedge against soaring inflation. Yet cryptocurrencies are still subject to uneven regulation, leaving investors with few recourses to fighting crime.
Financial watchdogs and policymakers from Washington to Frankfurt have fretted over the use of crypto for money laundering, with some urging lawmakers to give them greater power over the industry.
“Criminal abuse of cryptocurrencies creates huge barriers to continued adoption, increases the likelihood of restrictions imposed by governments, and worst of all at the expense of innocent people around the world,” Chainalysis said.
Driving the increase in crime is the explosion of fraud and theft on decentralized finance - DeFi - platforms, he said.
DeFi sites — which offer loans, insurance and other financial services while bypassing traditional gatekeepers like banks — have been plagued by issues that include flaws in the underlying code and unclear governance.
Overall cryptocurrency theft grew more than fivefold from 2020, with around $3.2 billion (€2.8 billion) worth of coins stolen last year. About $2.2 billion (€1.9 billion) of these funds, about 72 percent of the total, was stolen from DeFi sites.
Scams on DeFi platforms - such as "rugs", where developers set up fake investment opportunities before disappearing with investors' cash - totaled $7.8 billion (€6.9 billion), an 82 percent jump from 2021, Chainalysis said.
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