Cryptocurrency-linked crime surged to a record high last year in terms of value, with illegal addresses receiving a record $14 billion, up 79% from $7.8 billion in 2020, according to a new report from analysis firm Chainalysis.
The report is published at a time when regulators across the world are calling for greater controls over this fast-growing sector. Main concerns include scams, Ponzi schemes and ransomware that are behind the illicit addresses and illegal activities.
Although they still represent a small percentage of total crypto transactions, it has risen from 0.34% in 2020 to 0.62% in 2021.
In fact, at the end of the year, the International Monetary Fund stated that “The Financial Stability Board, in its coordinating role, should develop a global framework comprising standards for regulation of crypto assets.
The objective should be to provide a comprehensive and coordinated approach to managing risks to financial stability and market conduct that can be consistently applied across jurisdictions, while minimising the potential for regulatory arbitrage, or moving activity to jurisdictions with easier requirements.”
The Chainalysis report said, “Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being imposed by governments, and worst of all victimizes innocent people around the world.”
Digital assets including bitcoin and non-fungible tokens, have grown in popularity in 2021 thanks to institutional investors and major companies.
Overall volumes soared to $15.8 trillion in 2021, a five-fold increase from a year earlier.
The Chainalysis report attributed the jump in crime to the increase in decentralised finance (DeFi) platforms which facilitates crypto-denominated lending and trading outside traditional channels.
In 2020, around $162 million worth of cryptocurrency was stolen from DeFi platforms or 31% of the year’s total. This represented a 335% increase over 2019 while last year saw the figure rise another 1,330% to $2.3 billion, according to the report.
DeFi transaction volume skyrocketed 912% in 2021, and Chainalysis noted outsized gains on decentralized tokens like Shiba Inu have pushed investors to speculate.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” said the report.
It added, “But DeFi is unlikely to realise its full potential if the same decentralisation that makes it so dynamic also allows for widespread scamming and theft.”
©Markets Media Europe 2021