Written by Tonya Riley
Illicit cryptocurrency activity will hit a record $20.1 billion in 2022, up from the previous year’s $18.0 billion, largely due to increased U.S. sanctions targeting digital currencies, according to a report released Thursday by Chainalysis researchers. Increased from the dollar.
Last year, the U.S. government more aggressively sanctioned cryptocurrency-related entities and individuals, with nearly 44% of the $20 billion in transactions classified as illegal by Chainalysis involving licensed entities. It may be due to trading.
In classifying illicit cryptocurrency activity, Chainalysis identifies child sexual abuse material, human trafficking, ransomware, stolen funds, terrorist financing, fraud, cybercriminal administrators, darknet markets, and We have included transactions related to sanctions.
“This year [Treasury Department’s Office of Foreign Assets Control] Kim Grauer, Head of Research at Chainalysis, said: “And this year’s numbers confirm that.”
Tornado Cash was among the 10 cryptocurrency-related groups sanctioned by the U.S. government last year. This is because the North Korean hacking group Lazarus used this technology to steal $1 billion of cryptocurrency. The move against Tornado Cash is OFAC’s first sanctions against a decentralized protocol, and the move has been heavily criticized by blockchain industry leaders and privacy advocates, who argue that sanctions on the code exceed the authority of the Treasury Department. Did.
Another Chainalysis report found that sanctions reduced the flow of digital funds to some sanctioned entities, but the impact of OFAC sanctions was uneven.
After the sanctions, inflows into Tornado Cash decreased significantly. In contrast, after OFAC sanctioned Russian exchange Garantex for its role in money laundering schemes, trading on the exchange increased significantly. Transactions on the sanctioned Hydra Marketplace — Dirk’s web market popular with ransomware gangs and other cybercriminals — have fallen to zero as its infrastructure has been seized by German police.
Grauer said the crypto industry “must consider the fact that money is still flowing into some of these sanctioned services.”
Cryptocurrency misuse has become a growing concern in Washington, prompting the Treasury and Justice Departments to invest heavily in tracking and combating crimes that rely on digital currencies. The U.S. Treasury Department is expected to release a report in the coming weeks advising U.S. financial institutions on how to handle illicit financial risks.
Despite this, illegal activity remains a small part of the total cryptocurrency activity. According to Chainalysis figures, just 0.24% of all cryptocurrency transactions in 2022 will be linked to illegal activity, up from 0.12% in 2021.
One explanation for this shift is the decline in legal cryptocurrency trading this year, thanks to a volatile market for investors. “Fraud is down. Darknet market activity is down. Ransomware is down,” Grauer said. “We are in a bear market and that is certainly reflected in these high levels of illegal activity numbers.”
This turmoil may also be the reason for the drop in trading volume related to cryptocurrency scams in 2022. Chainalysis researchers reported in August that cryptocurrency scammers’ earnings declined as the Bitcoin price fell. market.
As of August, the top three cryptocurrency scams of 2022 were just a fraction of the top scams of 2021, according to Chainalysis.
