Due to Increased Fines, the Volume of Cryptocrime Has Reached an All-time High

January 17, 2023 World Blockchain

SINGAPORE – Despite the decline in the value of digital assets, the volume of cryptocurrency-related criminality reached a record high in 2022 because to more sanctioned organizations.

According to a more conservative estimate provided by blockchain research company Chainalysis, the volume of criminal transactions increased to US$20.1 billion (S$26.7 billion) in 2017.

Human trafficking, ransomware, misappropriated money, financing of terrorism, fraud, scams, cybercrimes, and the Darknet market are examples of these criminal activities.

This is an increase over the original forecast of US$14 billion, which put the amount at US$18 billion in 2021.

According to the business, the 2022 figure “is sure to climb over time as we uncover new addresses associated with criminal activity,” according to a report released on Thursday.

Chainalysis pointed out that non-crypto crimes like traditional drug trafficking, which accepts cryptocurrency as a form of payment, are not included in the computation.

44% of unlawful cryptocurrency transactions last year were associated with operations linked to firms that had been sanctioned, including the Russian exchange Garantex, which handled the majority of the number of transactions.

Chainalysis stated in a blog post on Monday that the Office of Foreign Assets Control (Ofac) of the US Department of the Treasury issued the first penalties relating to cryptocurrencies in 2018.

Along with the increase of sanction-related addresses, which increased from two in 2018 to 350 in 2022, the number of sanctioned crypto-linked businesses increased from two in 2018 to 10 in 2022.

Garantex was subject to Ofac sanctions in April 2022, but because it is based in Russia, it has been able to carry on with business as usual.

The report stated that transactions connected to Garantex or any other sanctioned crypto site “pose, at a minimum, severe compliance risk, including penalties and possibly criminal charges, for enterprises subject to US jurisdiction.”

The survey also discovered that, among all cryptocurrency transactions, the proportion of illicit activity has increased for the first time since 2019. From 0.12 percent in 2019 to 0.24 percent in 2022, it increased.

The research stated that the increase shouldn’t be taken as a surprise and that it was predicted because illicit transactions gradually increased while legal transactions decreased with the commencement of the bear market.

The growth in 2022, according to Chainalysis, is noteworthy because “the share correlates with a very high amount of economic value flows when stated in US dollars — roughly US$20 billion in 2022 and US$18 billion in 2021.”

These figures, it was noted, “are a base case for the extent of criminal activity on (the blockchain) and do not account for the usage of cryptocurrency to support physical-world drug trading or other operations.”

Given the paucity of off-chain data, Chainalysis stated that it does not include volumes related to centralized systems that collapsed in 2022, some of which are currently being investigated for fraud.