Cryptocrime will reach a record $20 billion in 2022, the report says

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 soared, data from blockchain analytics firm Chainalysis showed on Thursday.

The cryptocurrency market stumbled in 2022, as risk appetite waned and various crypto firms collapsed. Investors were left with heavy losses and regulators stepped up demands for more consumer protection.

Even as overall crypto transaction volumes fell, the value of crypto transactions related to illegal activity rose for the second consecutive year, Chainalysis said.

Transactions linked to sanctioned entities increased more than 100,000 times in 2022 and accounted for 44% of last year’s illicit activity, Chainalysis said.

Funds received by Russian exchange Garantex, which was sanctioned by the US Treasury Department in April, accounted for “much of 2022’s illegal volume,” Chainalysis said, adding that most of this activity is “probably Russian users using a Russian exchange” . A spokesperson for Chainalysis said that wallets are marked as “illegal” if they are part of a sanctioned entity.

Garantex did not immediately respond to an email request for comment.

The US 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 cybercrimes.

The volume of stolen crypto funds increased by 7% last year, but other illegal crypto transactions, including fraud, ransomware, terrorist financing and human trafficking, saw volumes decline.

“The market downturn may be a reason for this,” Chainalysis said. “We’ve previously found that crypto scams, for example, take in less revenue during bear markets.”

Chainalysis said the $20.1 billion estimate only includes activity recorded on the 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 must emphasize that this is a lower estimate – our measure of illicit transaction volume is sure to grow over time,” the report said, noting that the 2021 figure was revised to $18 billion from $14 billion as more frauds were discovered.

Reporting by Elizabeth Howcroft Editing by Tomasz Janowski

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