Cybercriminals laundered $8.6 billion in cryptocurrencies in 2021, up by 30 per cent from 2020, according to a recent report from blockchain analysis firm Chainalysis. Money laundering simply refers to the practice of converting money that was gained through criminal means, such as smuggling weapons, drug trafficking, etc., and making it look as if it came from a legitimate business activity.
The report titled: ‘2022 Crypto Crime Report’ notes that since 2017, more than $33 billion worth of crypto have been laundered, with most of the laundered money moving to cryptocurrency exchanges. The study reveals sales on dark web or ransomware attacks profits are always derived in cryptocurrency rather than fiat currency, thus contributing significantly to the spike.
Atleast 17 per cent of the $8.6 billion laundered went to decentralized finance applications, Chainalysis said. DeFi is an alternative finance ecosystem where consumers transfer, trade, borrow and lend cryptocurrency, independently of traditional financial institutions and the regulatory structures that have been built around banking.
Meanwhile, mining pools (a group of cryptocurrency miners who combine their computational resources over a network to strengthen the probability of finding a cryptocurrency), high-risk exchanges, and mixers(a practice where you send your money to an anonymous service and, if they are well-intentioned, they will send you someone else’s tainted coins), also saw substantial increases in value received from illicit addresses, the report said.
The report adds, “Wallet addresses associated with theft sent just under half of their stolen funds, or more than $750 million worth of crypto in total, to DeFi’s,”
Additionally, Chainalysis in its recent report revealed that scammers stole over $14 billion worth of cryptocurrency from victims in 2021 —up by 79 per cent from $7.8 billion in 2020. As of early 2022, Chainalysis said illicit address already hold over $10 billion worth of cryptocurrencies, with the majority of this held by wallets associated with cryptocurrency theft.
In another report in December, Chainalysis revealed that at least 36 per cent of the victims lost over $2.8 billion (Rs 280 crores approx.) to ‘rug pull’ cases. A rug pull is a malicious maneuver in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds. In total, crypto scams rose by 81 percent this year from 2020 led by rug pulls, the company said in a blog post.