Illicit cryptocurrency activity reached an all-time high of $20.1 billion in 2022, increasing from $18 billion the previous year in large part due to escalating U.S. sanctions targeting digital currencies, according to a report released Thursday by researchers at Chainalysis.
Last year saw the U.S. government more aggressively sanction cryptocurrency-related entities and individuals, and nearly 44% of the $20 billion in transactions classified as illicit by Chainalysis can be attributed to transactions linked to sanctioned entities.
In classifying illicit cryptocurrency activity, Chainalysis included transactions tied to child sexual abuse materials, human trafficking, ransomware, stolen funds, terrorism financing, scams, cybercriminal administrators, dark net markets and sanctions.
“This was the year that [Treasury Department’s Office of Foreign Assets Control] kind of started to come out pretty hard with their sanctioning of services,” said Kim Grauer, head of research at Chainalysis. “And we’re seeing that in our numbers this year.”
Among the 10 cryptocurrency-related groups sanctioned last year by the U.S. government were Tornado Cash, a mixing service that the Treasury Department’s Office of Foreign Assets Control sanctioned in response to the North Korean hacking group Lazarus’s use of the technology to launder more than half a billion in stolen cryptocurrency. The move against Tornado Cash represented OFAC’s first sanctions against a decentralized protocol, a move that drew fierce criticism from blockchain industry leaders and privacy advocates that argued sanctioning the code overstepped the Treasury Department’s authorities.
While sanctions have decreased the flow of digital funds to some sanctioned entities, the impact of OFAC sanctions have been uneven, according to a separate report by Chainalysis.
After it was sanctioned, inflows to Tornado Cash decreased significantly. By contrast, after OFAC sanctioned the Russian exchange Garantex for its role in money laundering schemes transactions on the exchange grew significantly. Transactions on the sanctioned Hydra Marketplace, a dark web market popular with ransomware gangs and other cyber criminals, dropped to zero — but that was because its infrastructure was seized by German police.
The cryptocurrency industry “is having to reckon with the fact that funds are still flowing to some of these services that have been sanctioned,” Grauer said.
The illicit use of cryptocurrencies is a growing concern in Washington and has led the Treasury and Justice Departments to make major investments in tracing and combating crime relying on digital currencies. The U.S. Treasury Department is expected in coming weeks to release a report advising U.S. financial institutions on handling illicit finance risks.
Nonetheless, illicit activity remains a small fraction of overall cryptocurrency activity. A mere .24% of all cryptocurrency transactions in 2022 were tied to illicit activity, up from .12% in 2021, according to Chainalysis’s figures.
One explanation for the shift is a fall in legitimate cryptocurrency transactions this year thanks due to a rocky market for investors. “Scamming is down. Dark net market activity is down. Ransomware is down,” said Grauer. “We’re in a bear market, and that is certainly reflected in the high-level numbers for those illicit activities.”
That turbulence may also be a reason that transaction volumes tied to cryptocurrency scams fell in 2022. Chainalysis researchers reported in August that revenue for cryptocurrency scammers dropped alongside sinking Bitcoin prices, suggesting that users are less likely to fall for scams promising big returns in a weak market.
As of August, the top three cryptocurrency scams in 2022 had made just a fraction of the top scams in 2021, according to Chainalysis.
FAQs
Illicit cryptocurrency activity reached an all-time high of $20.1 billion in 2022, increasing from $18 billion the previous year in large part due to escalating U.S. sanctions targeting digital currencies, according to a report released Thursday by researchers at Chainalysis.
How much crypto crime has increased in 2022? ›
In 2022, researchers tracked a total of 134 hacking cases, a major increase from the 104 incidents recorded in 2021. Analysts had been tracking the growing wave of hacking attempts on digital currencies as the year progressed.
How much crypto has been hacked in 2022? ›
As we revealed in last year's Crypto Crime Report, 2022 was the biggest year ever for crypto theft with $3.7 billion stolen. In 2023, however, funds stolen decreased by approximately 54.3% to $1.7 billion, though the number of individual hacking incidents actually grew, from 219 in 2022 to 231 in 2023.
How much of crypto transactions are illicit? ›
4 In its annual report, the cryptocurrency tracing company Chainalysis estimates that illicit activities represent the 0.34% of all cryptocurrency activities, or USD 10 billion in transaction volume in 2020.
What is special report cryptos on the rise 2022? ›
The 2022 special report expands beyond cryptocurrencies such as bitcoin. Considering the need to develop a regulatory framework, it investigates other crypto-related instruments, such as central bank digital currencies (CBDCs), non-fungible tokens (NFTs) and stablecoins, and highlights policy work in key countries.
Has Stablecoins enabled $40 billion in crypto crime since 2022? ›
In total, Chainalysis measured $40 billion in illicit stablecoin transactions in 2022 and 2023 combined. The largest single category of that stablecoin-enabled crime was sanctions evasion.
How much of crypto is used for crime? ›
In 2021, 0.15% of known cryptocurrency transactions conducted were involved in illicit activities like cybercrime, money laundering and terrorism financing, representing a total of $14 billion.
Which crypto has never been hacked? ›
Bitcoin is a relatively new technology, but in its twelve years of existence, Bitcoin has proven itself to be the most secure digital system in the world and the most reliable monetary system ever invented. Bitcoin's blockchain has never been hacked, and zero counterfeit currency has ever been uttered on the network.
Who stole billions in crypto? ›
Sam Bankman-Fried: Disgraced 'crypto king' jailed for 25 years after stealing billions of dollars from FTX customers. Secret back doors had been established that allowed SBF's other company, Alameda Research, to access money belonging to FTX customers and make risky bets without their knowledge.
What is the largest cryptocurrency theft? ›
Mt. Gox remains the greatest cryptocurrency robbery in history, with over 850k Bitcoin stolen between 2011 and 2014. Mt. Gox claimed that a fault that caused the loss is due to an underlying bug in Bitcoin, known as transaction malleability.
Criminals can use cryptocurrencies instead of the formal banking system to move large sums of money which entails a potentially lower risk of being detected by law enforcement or the traditional financial institutions which are required to submit suspicious transaction reports.
Can you go to jail for using crypto? ›
If the government sees evidence that you may have participated in the unlawful gain of cryptocurrency, you could be charged with theft. These are just some of the federal criminal offenses that can be charged with the use of cryptocurrency.
What is the value of cryptocurrency stolen each day on average? ›
Question of the Day: What is the value of cryptocurrency stolen each day on average? Answer: Over $10 million a day!
Which crypto grew the most in 2022? ›
Top 10 Fastest Growing Cryptocurrencies to Explore in 2022
- Terra. The rise in LUNA's price can be well-attributed to a few factors. ...
- Solana. ...
- TechPay Coin. ...
- NEAR. ...
- Avalanche. ...
- Polygon. ...
- FLOW. ...
- Fantom.
FTX collapsed in early November 2022 after journalists reported an affiliated trading firm, Alameda Research, derived most of its value from speculative cryptocurrency tokens.
What is the top moving crypto 2022? ›
In the last 1 year, MAGA has performed the best with 74,489.00% gain. The best performing coin in 2022 is BOOK OF MEME which gained 14,466.30% since the year started. The worst performing coin in the last 1 year is Wormhole which lost -72.32% of it's value.
How much did crypto crash in 2022? ›
As a result, the cryptocurrency market's capitalization declined from $2.9 trillion in November 2021 to $798 billion at the end of 2022.
How many crypto projects failed in 2022? ›
How many cryptocurrencies have failed?
| Year | Abandoned or No Volume | Failed Initial Coin Offerings (ICO) or Short-Lived |
|---|
| 2019 | 203 | 51 |
| 2020 | 77 | 9 |
| 2021 | 34 | 2 |
| 2022 | 50 | 8 |
7 more rowsMay 31, 2023
“Hacks of DeFi protocols largely drove the huge increase in stolen crypto that we saw in 2021 and 2022, with cybercriminals stealing more than $3.1 billion in DeFi hacks in 2022. But in 2023, hackers stole just $1.1 billion from DeFi protocols,” the researchers said.
How many people get scammed in crypto? ›
Scammers have found creative ways to cheat investors out of their money, the BBB said in its annual report about the biggest scams of 2023, which is based on 67,000 reports of scams. About 80% of Americans targeted in crypto and investment scams last year lost money, the BBB reported.
