Illicit use of cryptocurrencies hit a record $20.1 billion last year as transactions involving companies hit by US sanctions soared, data from blockchain analytics firm Chainalysis showed on Thursday.
The cryptocurrency market crashed in 2022, as risk appetite decreased and various crypto companies collapsed. Investors were left with heavy 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 in a row, Chainalysis said.
Transactions associated with sanctioned entities increased more than 100,000 times in 2022 and accounted for 44% of last year̵7;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 illicit volume,” Chainalysis said, adding that most of that activity is “likely Russian users using a Russian exchange .” A spokesperson for Chainalysis said that wallets are tagged as “illegal” if they are part of a sanctioned entity.
Garantex did not immediately respond to an emailed 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 in proceeds from their cyber crimes.
The volume of stolen crypto funds increased by 7% last year, but other illegal crypto transactions, including those related to fraud, ransomware, terrorist financing and human trafficking, saw volumes decline.
“The market downturn could be a reason for this,” Chainalysis said. “We’ve previously found that crypto scams, for example, bring in less revenue in bear markets.”
Chainalysis said its $20.1 billion estimate only includes activity recorded on the blockchain and excludes “off-chain” crime such as fraudulent accounting by crypto companies.
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-bound estimate – our measure of illegal transaction volumes will certainly grow over time,” the report said, noting that the 2021 figure was revised to $18 billion from $14 billion as more fraud was discovered. .