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Cryptocurrency-based crimes pegged at $14 billion in 2021: Report

As a percentage of cryptocurrency transactions, however, the level of frauds shrank to a record low.

January 10, 2022 / 06:03 PM IST
Representative image

Representative image

Cryptocurrency-based crime hit a high in 2021, with transactions involving illicit addresses receiving $14 billion over the year, up from $7.8 billion in 2020, blockchain data firm Chainalysis said.

However, as a percentage of cryptocurrency transaction volumes, the share of fraudulent transactions shrank to a record low of 0.15 percent in 2021, the firm said in a blog on its website, previewing its 2022 Crypto Crime Report due out in February.

Across all cryptocurrencies tracked by Chainalysis, the total transaction volume grew to $15.8 trillion in 2021, a six-fold increase from 2020’s totals.

The yearly trends suggest that crime is becoming a smaller part of the cryptocurrency ecosystem – except for 2019, an outlier year largely due to the PlusToken Ponzi scheme. They also show that law enforcement’s ability to combat cryptocurrency-based crime is evolving.

“We’ve seen several examples of this throughout 2021, from the CFTC (Commodity Futures Trading Commission) filing charges against several investment scams to the Federal Bureau of Investigation’s takedown of the prolific REvil ransomware strain, to the US Treasury’s Office of Foreign Assets Control’s sanctioning of Suex and Chatex, two Russia-based cryptocurrency services heavily involved in money laundering,” Chainalysis said in the blog.

Two categories stood out in terms of growth in crypto crimes – stolen funds and scams. Decentralised finance (DeFi) was a major part of both, with DeFi transaction volumes growing 10-fold in 2021.

DeFi is a financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. The system eliminates the control that banks and institutions have on money and financial products and services.

Scamming revenue rose 82 percent to $7.8 billion worth of cryptocurrency stolen from victims in 2021.

According to Raj Kapoor, founder of the India Blockchain Alliance, while DeFi remains one of the most exciting areas in the cryptocurrency ecosystem, it has not yet realised 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,” Kapoor said.

In cryptocurrency theft, roughly $3.2 billion worth of cryptocurrency was stolen in 2021, a six-fold increase from 2020.

Pratik Gauri, founder of 5ire, a blockchain ecosystem, said outdated technology, protocol loopholes and 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.

Murtuza Merchant is a senior journalist and an avid follower of blockchain and cryptocurrencies.
first published: Jan 10, 2022 06:03 pm