Turbulent year for crypto as illicit activity reaches new high


Illicit activity in the crypto space reached an all-time high of $20.1bn in 2022, up from $18bn the previous year.

According to Cyberscoop, Chainalysis claims the rise of activity was attributed to escalating US sanctions targeting digital currencies.

Last year, the US government sanctioned more aggressively crypto-related entities and individuals, with nearly 44% of the $20bn in transactions classified as illicit by Chainalysis being attributed to transactions linked to sanctioned entities.

In classifying activity, Chainalysis involved transactions tied to child sexual abuse materials, human trafficking, ransomware, stolen funds, terrorism financing, scams, cybercriminal administrators, dark net markets and sanctions.

Kim Grauer, head of research at Chainalysis, remarked, “This was the year that Treasury Department’s Office of Foreign Assets Control kind of started to come out pretty hard with their sanctioning of services. And we’re seeing that in our numbers this year.”

A separate report by the company noted that while sanctions have decreased the flow of digital funds to some sanctioned entities, the impact of OFAC sanctions have been uneven.

Grauer added that the crypto industry ‘is having to reckon with the fact that funds are still flowing to some of these services that have been sanctioned’.

Illict activity, however, remains a small fraction of all crypto activity. Up to .24% of all crypto transactions in 2022 were linked to illicit activity, up from .12% the year prior, claims Chainalysis.

Grauer concluded that one explanation for the shift is a fall in legitimate crypto transactions this year thanks to a rocky market for investors. “Scamming is down. Dark net market activity is down. Ransomware is down. We’re in a bear market, and that is certainly reflected in the high-level numbers for those illicit activities.”

Global software spend on financial crime prevention tools will exceed $28.7bn by 2027, up from $22.1bn in 2023, Juniper Research recently claimed.

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