Cryptocurrency misuse last year hit a record $20.1 billion, according to data from blockchain analytics firm Chainalysis, with a surge in transactions involving companies subject to U.S. sanctions.
In 2022, the cryptocurrency market suffered as risk appetite declined and various cryptocurrency companies went bankrupt. Investors suffered heavy losses and regulators stepped up calls for greater consumer protection.
According to Chainalysis, the value of illicit-related cryptocurrency transactions has risen for the second year in a row, despite a decline in overall cryptocurrency trading volume.
Transactions involving sanctioned entities will increase more than 100,000-fold in 2022, accounting for 44% of illegal activity last year, according to Chainalysis.
Funds received by Russian exchange Garantex, which was licensed by the U.S. Treasury Department in April, accounted for “the bulk of 2022’s illicit trading volume,” Chainalysis said, adding that most of its activity was “trading in Russia.” It is likely that it is a Russian user using the site,” he added. A Chainalysis spokesperson said that wallets will be tagged as “illegal” if they are part of a licensed organization.
Garantex did not immediately respond to an emailed request for comment.
The US also sanctioned cryptocurrency mixing services Blender and Tornado Cash last year. These services were used by hackers, including North Koreans, to launder billions of dollars worth of cybercrime revenue.
Last year, the volume of stolen cryptocurrency funds increased by 7%, while the volume of other illicit cryptocurrency transactions, including those related to fraud, ransomware, terrorism financing and human trafficking, decreased.
“Market weakness may be one of the reasons,” Chainalysis said. “Cryptocurrency scams, for example, have historically proven to yield less in bear markets.”
Chainalysis says its $20.1 billion estimate only includes activity recorded on the blockchain and excludes “off-chain” crime such as fraudulent accounting by cryptocurrency companies.
The figure also excludes cases where the proceeds of crimes not related to cryptocurrencies are included, such as when cryptocurrencies are used as a means of payment for drug trafficking, Chainalysis said.
“It should be stressed that this is a low-end estimate. Measures of illegal trade volume will certainly increase over time,” the report said, adding that the 2021 figure is likely to be higher. It has been revised from $14 billion to $18 billion due to fraud being discovered. .
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