Chainalysis report detailed how cybercriminals laundered their crypto funds in 2021 compared to the previous year, with DeFi protocols seeing the biggest increase in use.
Chainalysis points out that the $33.4 billion in crypto laundered since 2017 pales compared to the estimated $2 trillion in fiat is laundered yearly from offline crimes such as drug trafficking. However, a reliable assessment of the amount of fiat laundered is more difficult to determine than crypto due to the use of untraceable cash in offline crimes. The report states: “The biggest difference between fiat and cryptocurrency-based money laundering is that, due to the inherent transparency of blockchains, we can more easily trace how criminals move cryptocurrency between wallets and services in their efforts to convert their funds into cash.”
Laundering Money With Cryptocurrency: What Are The Chances!!
A new Chainalysis report has revealed that $8.6 billion in value was laundered through cryptocurrency in 2021. It marks a 25% increase from 2020 but remains well below the high watermark hit in 2019.
That year $10.9 billion in value was laundered via cryptocurrency.
Since 2017, Chainalysis estimates that a total of $33.4 billion in crypto has been laundered.
According to the cybersecurity analytics provider, the value of the laundered crypto was derived from “crypto-native crimes,” in which “profits are virtually always derived in cryptocurrency rather than fiat currency.”
The coming year is likely to see crypto-related crime decrease to an ever-smaller share of the overall industry as law enforcement takes greater advantage of the transparency provided by blockchain technology, says Kim Grauer, director of research at Chainalysis.
According to a January 6 report from Chainalysis, the growth of legitimate cryptocurrency usage is “far outpacing the growth of criminal usage.” The share of cryptocurrency transaction volume associated with illicit activity has never been lower, representing just 0.15% of transaction volume in 2021.
She said that things are looking hopeful in the space as “the illicit share of transaction volume continues to fall” and “the narrative that crypto is primarily a means for criminals to transact is finally being put to bed.” “Law enforcement wins continue to demonstrate to bad actors that cryptocurrency’s inherent transparency makes it an undesirable means for transferring illicit funds. But, unfortunately, cash is still king when it comes to illicit finance, and that is not likely to change.”
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In 2021, rug pulls became crypto criminals’ scam of choice. Scamming revenue rose 82% in 2021 to $7.8 billion, with over $2.8 billion of this total coming from rug pulls alone.
For the first time since 2018, centralized exchanges (CEX) accounted for less than half (47%) of the value laundered, signaling a potential change in cyber criminals’ behavior. DeFi protocols saw their utility for illicit addresses increase nearly 2,000% from a 2% share in 2020 to 17% in 2021.
Hackers, such as the infamous North Koreans who stole about $400 million, strongly preferred DeFi while scammers tended to prefer CEX, which Chainalysis attributes to a “relative lack of sophistication.” By asset, altcoins saw the largest concentration as 68% of those laundered went to the 20 largest deposit addresses used for illicit activity. Ethereum (ETH) was next with 63%, stablecoins at 57%, and Bitcoin (BTC) was by far the least concentrated, with only 19% going to the top addresses. Chainalysis said, “Mining pools, high-risk exchanges, and mixers also saw substantial increases in value received from illicit addresses as well.”
Of the funds laundered in 2021, a greater proportion arrived at the top-five laundering services in 2021 (58%) than in 2020 (54%). However, the overall concentration of money laundering decreased in 2021 as 583 addresses received deposits of at least $1 million in value, while in 2020, 270 such addresses were used.