The widespread adoption of cryptocurrency broke transaction volume records in 2021, but the 567% surge had a magnetic pull on cybercriminals, who turned to the blockchain for scamming and thievery, according to preliminary data from blockchain analytics firm Chainalysis.
Cryptocurrency is full-on mainstream, with transaction volume hitting an estimated $15.8 trillion in 2021. That widespread adoption, however, attracted a record number of crypto-related crimes, up 79% to reach $14 billion, Chainalysis senior content marketing manager Henry Updegrave said in a blog post about the report on Thursday (Jan. 6). The full report will be released next month.
See also: 2021 Crypto Scams Top $7.7B, Fueled by DeFi-Friendly ‘Rug Pulls’
“Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency. But the fact that the increase was just 79% — nearly an order of magnitude lower than overall adoption — might be the biggest surprise of all,” Updegrave said.
“In fact, with the growth of legitimate cryptocurrency usage far outpacing the growth of criminal usage, illicit activity’s share of cryptocurrency transaction volume has never been lower,” he added.
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Transactions involving illicit addresses represented 0.15% of cryptocurrency transaction volume in 2021, a number that could go up as Chainalysis identifies more addresses. Overall, the yearly trends point to cybercrime comprising a shrinking percentage of the crypto landscape, with the exception of 2019, an outlier year, according to the post. That year involved the PlusToken Ponzi scheme, which inflated the numbers.
Scamming, the most common crypto crime last year, largely took place took place along decentralized finance (DeFi) platforms. Theft, the second most common crime, was mostly hacking crypto businesses, also largely on DeFi.
Updegrave said that crypto criminal activity “creates huge impediments for continued adoption” and despite the high increase in transaction volume in 2021, “$14 billion worth of illicit activity represents a significant problem.”
DeFi protocols saw the most growth by far in usage for money laundering at 1,964% and DeFi platforms have been a hotbed for stolen funds.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem,” Updegrave said. But DeFi is unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft.”
