LONDON, Jan 12 (Reuters) – Illicit use of cryptocurrencies hit a record $20.1 billion last year as transactions involving companies 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.
Even as overall crypto transaction volumes fell, the value of crypto transactions related to illicit activity rose for the second year running, Chainalysis said.
Transactions associated with sanctioned entities increased more than 100,000-fold in 2022 and made up 44% of last year'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 most of that activity is "likely Russian users using a Russian exchange." A spokesperson for Chainalysis said wallets are tagged as "illicit" if they are part of a sanctioned entity.
Garantex did not immediately respond to an emailed request for comment.
The United States also imposed sanctions last year on cryptocurrency mixing services Blender and Tornado Cash, which it said were being used by hackers, including from North Korea, to launder billions of dollars worth of proceeds from their cyber crimes.
The volume of stolen crypto funds rose 7% last year, but other illicit crypto transactions including those related to scams, ransomware, terrorism financing and human trafficking, saw volumes fall.
"The market downturn may be one reason for this," Chainalysis said. "We've found in the past that crypto scams, for instance, take in less revenue during bear markets."
Chainalysis said its $20.1 billion estimate only includes activity recorded on blockchain, and excludes "off-chain" crime such as fraudulent accounting by crypto firms.
The figure also excludes when cryptocurrencies are the proceeds of non-crypto-related crimes, such as when cryptocurrency is used as a means of payment in drug trafficking, Chainalysis said.
"We have to stress that this is a lower bound estimate – our measure of illicit transaction volume is sure 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.
Our Standards: The Thomson Reuters Trust Principles.
Thomson Reuters
Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money driving "Web3".
Major markets such as the United States need new statutory definitions of digital assets to provide regulatory clarity for the sector, Jeremy Allaire, CEO of USDC stablecoin issuer Circle said on Monday.
Reuters, the news and media division of Thomson Reuters, is the world’s largest multimedia news provider, reaching billions of people worldwide every day. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers.
Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology.
The most comprehensive solution to manage all your complex and ever-expanding tax and compliance needs.
The industry leader for online information for tax, accounting and finance professionals.
Access unmatched financial data, news and content in a highly-customised workflow experience on desktop, web and mobile.
Browse an unrivalled portfolio of real-time and historical market data and insights from worldwide sources and experts.
Screen for heightened risk individual and entities globally to help uncover hidden risks in business relationships and human networks.
All quotes delayed a minimum of 15 minutes. See here for a complete list of exchanges and delays.
© 2022 Reuters. All rights reserved
