The illegal use of cryptocurrency surged to $20.1bn in 2022, according to a report published by Chainalysis on Thursday.
The crypto intelligence firm looked at illicit transactions registered over the past year, which was punctuated by several high-profile collapses of prominent companies and the meltdown of the entire crypto market.
This could have been a contributing factor to the overall rise in criminal activities tied to crypto assets, but it’s not the only one.
Last year was also a catalyst for a global change in crypto regulation, with governments and watchdogs drumming up the need for stricter rules.
Chainalysis noted that 2022 was the second year in a row that illegal crypto use increased. Specifically, the number of transactions connected to sanctioned entities increased by 44% from 2021 in terms of illicit activity tied to sanctioned entities.
A big chunk of these illicit transactions were traced to Russian crypto exchanges, the company explained, adding that the war in Ukraine had made many Russian citizens turn to cryptocurrency to avoid crippling sanctions or save their funds.
Meanwhile, a global crackdown on suspicious crypto entities continued, with the US going after Tornado Cash and Blender, crypto mixers that were reportedly used by hackers to obfuscate the source of their funds.
Chainalysis cautioned that the number, $20.1bn, does not actually include any off-chain transactions, as the firm focuses on blockchain transactions only. Off-chain crime could relate to fraudulent accounting by crypto companies (think, for example, FTX).
Chainalysis also said that a previous estimate of illicit crypto activity of $14bn had to be revised for 2021, as the actual amount of such transactions amounted to $18bn after more scams were uncovered by the intelligence firm. Chainalysis noted that the amount of scams tends to drop during a bear market.
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