As prices rose, crypto crime reached an all-time high of $14 billion in 2021

According to a new survey, the percentage of unlawful transactions has decreased dramatically, but the dollar value has increased.

According to a recent analysis from blockchain analytics firm Chainalysis, crypto crime accounted for a record-breaking $14 billion in blockchain transactions in 2021. In 2021, the value of illicit transactions was nearly double that of criminal blockchain activity in 2020, which was $7.8 billion.

Despite the sharp increase in criminal activity by total volume, the results for 2021 are noteworthy for another reason: criminal activity reached an all-time low as a percentage of all crypto transactions last year.

In 2021, the cryptocurrency market boomed, with overall transaction volume increasing by more than 550 percent to $15.8 trillion. Criminal behaviour accounted for 0.15 percent of all blockchain transactions last year, according to Chainalysis’ research, down 75 percent from 2020 and nearly 96 percent from 2019.

DeFi pulls the rug

The surge in decentralised finance, according to Grauer and her team, has increased the volume of both frauds and legal crypto transactions (DeFi).

Scams accounted for the majority of criminal activity in 2021, reaching 82 percent to $7.8 billion. Rug pulls, an increasingly common crypto scam in which developers establish legitimate-looking businesses, load their pockets, and then vanish, accounted for over $3 million of the total, according to Chainalysis’ study.

Apart from rug pulls, Grauer told CoinDesk that DeFi platforms were utilised for money laundering and were the subject of large-scale theft by hackers.

“We’ve never seen DeFi services compromised at such a high rate.” People are not just using DeFi to commit crime, but they are also targeting DeFi for crime, according to Grauer.

“DeFi platform protocols are frequently hacked since it’s a new market with a lot of open-source code, making it easy for individuals to look at the code and find flaws.”

DeFi protocols were responsible for $2.2 billion in crypto theft in 2021, accounting for about two-thirds of all crypto stolen last year and a 516 percent rise over 2020 estimates.

Is there a deterrent effect from law enforcement?

As government agencies focus their attention to crypto crime, law enforcement measures against unscrupulous actors in the crypto industry increased last year.

Last year, the Criminal Investigation Unit of the Internal Revenue Service reported capturing $3.5 billion in cryptocurrency, $1 billion of which was linked to the darknet marketplace Silk Road.

The majority of the bitcoin ransom from last year’s ransomware attack on Colonial Pipeline was successfully collected by the US Department of Justice.

In 2021, Australian police arrested more than 300 crime syndicates and recovered “almost $48 million in various worldwide currencies and cryptocurrencies,” while law enforcement in the United Kingdom seized millions of dollars in cryptocurrency from criminals.

“Across the board, we’ve seen law enforcement stepping up to take on the issue of tracking down crypto criminality,” Grauer told CoinDesk.

“There have been significant law enforcement operations that have sent a deterrence message to the public,” she said. “Perhaps what seemed like a crime in the past you could have gotten away with – maybe you’re a little more hesitant now.”

The coming year

Actions by law enforcement against malicious crypto actors are showing no signs of stopping down: In November, IRS Criminal Investigation Chief Jim Lee assured reporters that the trend of crypto seizures would continue in 2022.

Government agencies are progressively gaining the capabilities and adding the resources needed to go after blockchain criminals as they continue to sign contracts with blockchain research providers like Chainalysis and Coinbase.

Bad actors, on the other hand, are frequently faster than law enforcement in adapting to new technologies, according to Grauer.

“Criminals are fast to hear about a new possible money laundering solution and then lean in and take advantage of it,” Grauer added.

Scamming isn’t going away, despite increased law enforcement efforts.

It’s impossible to undertake due diligence on all of the competing new ventures when there are so many,” Grauer noted. “Individuals are treating [investment] like a roulette table, and I believe this will lead to a lot of opportunities for people to be duped.”

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