LONDON (Reuters) – Illicit use of cryptocurrencies hit a record $20.1 billion last 12 months as transactions involving corporations targeted by U.S. sanctions skyrocketed, data from blockchain analytics firm Chainalysis showed on Thursday.
The cryptocurrency market floundered in 2022, as risk appetite diminished and various crypto firms collapsed. Investors were left with large losses and regulators stepped up calls for more consumer protection.
At the same time as overall crypto transaction volumes fell, the worth of crypto transactions related to illicit activity rose for the second 12 months running, Chainalysis said.
Transactions related to sanctioned entities increased greater than 100,000-fold in 2022 and made up 44% of last 12 months’s illicit activity, Chainalysis said.
Funds received by the Russian exchange Garantex, which was sanctioned by the U.S. Treasury Department in April, accounted for “much of 2022’s illicit volume”, Chainalysis said, adding that the majority of that activity is “likely Russian users using a Russian exchange.” A spokesperson for Chainalysis said wallets are tagged as “illicit” in the event that they are a part of a sanctioned entity.
Garantex didn’t immediately reply to an emailed request for comment.
The US also imposed sanctions last 12 months on cryptocurrency mixing services Blender and Tornado Money, which it said were getting used by hackers, including from North Korea, to launder billions of dollars value of proceeds from their cyber crimes.
The amount of stolen crypto funds rose 7% last 12 months, but other illicit crypto transactions including those related to scams, ransomware, terrorism financing and human trafficking, saw volumes fall.
“The market downturn could also be one reason for this,” Chainalysis said. “We have found previously that crypto scams, for example, soak up less revenue during bear markets.”
Chainalysis said its $20.1 billion estimate only includes activity recorded on blockchain, and excludes “off-chain” crime akin to fraudulent accounting by crypto firms.
The figure also excludes when cryptocurrencies are the proceeds of non-crypto-related crimes, akin to when cryptocurrency is used as a way of payment in drug trafficking, Chainalysis said.
“Now we have to emphasize that it is a lower sure estimate – our measure of illicit transaction volume is certain to grow over time,” the report said, noting that the figure for 2021 was revised to $18 billion from $14 billion as more scams were discovered.
(Reporting by Elizabeth Howcroft; Editing by Tomasz Janowski)
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