Cryptocurrency-based crime hit a new all-time high in 2021, with illicit addresses receiving $14 billion over the year, up from $7.8 billion in 2020, a report by blockchain analytics firm Chainlysis has stated.
Across all cryptocurrencies tracked by Chainalysis, total transaction volume grew to $15.8 trillion in 2021, up 567 percent from 2020’s totals. However, transactions involving illicit addresses represented just 0.15 percent of cryptocurrency transaction volume in 2021 despite the raw value of illicit transaction volume reaching its highest level ever.
The yearly trends suggest that except for 2019, an extreme outlier year for cryptocurrency-based crime largely due to the PlusToken Ponzi scheme, crime is becoming a smaller and smaller part of the cryptocurrency ecosystem and the law enforcement’s ability to combat cryptocurrency-based crime is also evolving.
“We’ve seen several examples of this throughout 2021, from the CFTC filing charges against several investment scams to the FBI’s takedown of the prolific REvil ransomware strain, to OFAC’s sanctioning of Suex and Chatex, two Russia-based cryptocurrency services heavily involved in money laundering,” the report states.
Two categories stand out for growth in crypto crimes - stolen funds and, to a lesser degree, scams, with DeFi being a big part of the story for both with DeFi transaction volume has grown 912 percent in 2021.
Scamming revenue rose 82 percent in 2021 to $7.8 billion worth of cryptocurrency stolen from victims. Over $2.8 billion of this total, which is nearly equal to the increase over 2020’s total, came from rug pulls.
Raj Kapoor, Founder - India Blockchain Alliance and Chief Growth Officer at Chainsense LTD said while DeFi remains one of the most exciting areas in the cryptocurrency ecosystem, it has not yet realized its full potential and allows for widespread scamming and theft.
“Frankly for those in the know, it is relatively easy to create new DeFi tokens and get them listed on exchanges. Scammers have sniffed out the loopholes and taken advantage of the gullibility and greed of investors,” he said.
Cryptocurrency theft grew even more, with roughly $3.2 billion worth of cryptocurrency stolen in 2021, a 516 percent increase compared to 2020. Roughly $2.2 billion of those funds, 72 percent of the 2021 total, were stolen from DeFi protocols. In 2020, just under $162 million worth of cryptocurrency was stolen from DeFi platforms, which was 31 percent of the year’s total amount stolen.
That alone represented a 335 percent increase over the total stolen from DeFi platforms in 2019. In 2021, that figure rose another 1,330 percent.
Pratik Gauri, Founder of 5ire, a blockchain ecosystem that brings forward Sustainability, Technology, and Innovation to build the fifth industrial revolution said outdated technology, protocol loopholes, and ample security breaches embolden new-age criminals to commit such crimes with impunity.
“Technology is the answer to tech crimes. Blockchain technology can be very effectively leveraged to prevent these. Smart policing backed by the revolutionary blockchain technology is the answer to prevent such crimes,” Gauri said.
