Crypto crime ‘hits all-time high’ in 2021

Cryptocurrency-based crime hit a new all-time high in 2021, according to a report by blockchain data platform Chainalysis.

Cryptocurrency addresses linked to illicit activity received $14 billion over the course of 2021, up from $7.8 billion in 2020.

Total transaction volume across all cryptocurrencies grew to $15.8 trillion in 2021, up 567 per cent from the total for 2020.

Growth of legitimate cryptocurrency usage far outpaced the growth of criminal usage according to Chainalysis, and illicit activity’s share of cryptocurrency transaction volume has never been lower, with illicit transactions growing just 79 per cent in 2021, much slower than overall adoption.

Illicit transactions accounted for 1.42 per cent of all cryptocurrency transactions in 2017, but currently only represent 0.15 per cent of cryptocurrency transaction volume in 2021, despite the raw value of illicit transaction volume reaching its highest level ever.

However, Chainalysis caveated this figure and said that that it is likely to rise as it identifies more addresses associated with illicit activity and incorporates their transaction activity into its historical volumes.

The firm identified the growth of decentralised finance (DeFi) as a key factor driving the growth of illicit cryptocurrency transactions and said these grew 1,330 per cent year-on-year in 2021.

DeFi is a blockchain-based form of finance that does not rely on traditional intermediaries such as brokerages, exchanges, or banks, and instead utilises smart contracts on blockchains, the most common being cryptocurrency Ethereum.

Chainalysis estimated that as of early 2022, illicit addresses hold at least $10 billion worth of cryptocurrency, with the vast majority of this held by wallets associated with cryptocurrency theft.

The report comes after a year that has seen some extremely damaging and high-profile cryptocurrency-related crime.

In August 2021, hackers stole $600 million in cryptocurrency from decentralised finance provider (DeFi) Poly Network.

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