Threat actors laundered $8.6bn in cryptocurrency last year, although the real figure could be much higher when “non-crypto” crimes are included, according to Chainalysis.
The firm provides analysis and investigation software to help shine a light on the murky world of blockchains and decentralized finance (DeFi).
Findings from an upcoming report released yesterday revealed a 30% year-on-year increase in the value associated with money laundering activity via cryptocurrency in 2021.
However, that’s not the whole story.
“We also need to note that these numbers only account for funds derived from ‘cryptocurrency-native’ crime, meaning cyber-criminal activity such as darknet market sales or ransomware attacks in which profits are virtually always derived in cryptocurrency rather than fiat currency,” the firm explained.
“It’s more difficult to measure how much fiat currency derived from offline crime – traditional drug trafficking, for example – is converted into cryptocurrency to be laundered. However, we know anecdotally this is happening.”
Despite its reputation for being something of a Wild West, it’s easier to monitor money laundering efforts where cryptocurrency is involved because of the transparent nature of blockchains.
To that end, DeFi protocols received the majority of illicit funds last year, the first since 2018 where centralized exchanges haven’t been the number one recipient, according to Chainalysis.
That amounts to a 1,964% year-on-year increase in total value received by DeFi protocols from illicit addresses to a total of $900m in 2021. North Korean hackers, who stole an estimated $400m of cryptocurrency last year, were heavy users of DeFi, Chainalysis claimed.
The good news is that money laundering is still concentrated on a small number of services, although slightly less so than in 2020.
The analysis revealed that over half 55% of all cryptocurrency sent from illicit addresses went to only 270 service deposit addresses.
Among these addresses were those associated with two exchanges sanctioned by the US Treasury last year: Suex and Chatex.
“Law enforcement can strike a huge blow against cryptocurrency-based crime and significantly hamper criminals’ ability to access their digital assets by disrupting these services,” Chainalysis claimed.
