LONDON, Jan 12 (Reuters) – Illicit use of cryptocurrencies reached a record $20.1 billion last year, as transactions involving companies targeted by US sanctions have skyrocketed, according to reports. data from blockchain analytics firm Chainalysis.
The cryptocurrency market crashed in 2022 as risk appetite declined and various cryptocurrency companies collapsed. Investors have suffered large losses and regulators have stepped up calls for greater consumer protection.
Even as overall crypto transaction volumes have declined, the value of crypto transactions related to illicit activity has increased for the second consecutive year, Chainalysis said.
Transactions associated with sanctioned entities increased more than 100,000 times in 2022 and made up 44% of illicit activity last year, Chainalysis said.
Funds received by Russian exchange Garantex, which was sanctioned by the US Treasury Department in April, accounted for “a large portion of 2022’s illicit volume,” Chainalysis said, adding that most of that activity is “probably Russian users using a Russian exchange”. A Chainalysis spokesperson said the wallets are labeled “illegal” if they are part of a sanctioned entity.
Garantex did not immediately respond to an emailed request for comment.
The United States also last year imposed sanctions on cryptocurrency mixing services Blender and Tornado Cash, which it says are being used by hackers, including from North Korea, to launder billions of dollars in proceeds from their cybercrimes.
The volume of stolen crypto funds increased by 7% last year, but other illicit crypto transactions, including those related to scams, ransomware, terrorist financing and human trafficking, have seen volumes drop.
“The market downturn may be one reason for that,” Chainalysis said. “We have found in the past that cryptocurrency scams, for example, generate less revenue during bear markets.”
Chainalysis said its $20.1 billion estimate includes only assets recorded on blockchain and excludes “off-chain” crimes such as fraudulent accounting by crypto firms.
The figure also excludes when cryptocurrencies are the proceeds of uncrypted crimes, such as when cryptocurrency is used as a means of payment in drug trafficking, Chainalysis said.
“We need to point out that this is a lower estimate – our measure of illicit transaction volume is definitely going to grow over time,” the report said, noting that the figure for 2021 has been revised to $18 billion from $14 billion man as more scams have been uncovered.
Reporting by Elizabeth Howcroft Editing by Tomasz Janowski
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