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20 Billion in Illegal Crypto Activity, According to Chainalysis

After two years of decline, the percentage of illicit activities starts to rise again from 0.12% in 2021 to 0.24% in 2022. This represents $20.1 billion spread across different sectors of illegal activities. the only sector that really increased, in addition to the one due to penalties, is theft. The simple theft of crypto by trickery or protocol hacking increases by 7% year on year.

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2022, another good year for scammers – Chainalysis’ files are eagerly awaited by crypto professionals and observers. DeFi, NFT, and exchange platforms, their services cover all areas of the sector and regularly offer relevant reports for the industry.

Read more about illegal activity registered this past year and find the most important business news of the day with the Born2Invets mobile app.

The preamble to the figures and calculation methods of Chainalysis

Before giving raw numbers, Chainalysis would like to put some data in context. Because when playing with numbers, one can make the same graphs say many different things. First precision, the figures that are given for 2022 are likely to change. Indeed, as new scams are discovered in 2023, they may change the 2022 data.

Second, keep in mind that only so-called crypto-native illicit activities are counted. If you buy drugs with your BTC, technically it is not counted. Last but not least, what about the activities of platforms that are accused of fraud? Indeed, FTX or Terra (LUNA) are still in the procedure. In order to simplify and avoid any legal pitfalls, Chainalysis teams have not included these data in the calculation of illegal activities. This is all the more true since the laundering of these gains is sometimes on-chain and sometimes not.

Chainalysis report on the share of illicit activities in the field of cryptos

The first visible observation is an increase in the share of illicit activities. After two years of decline, the percentage starts to rise again from 0.12% in 2021 to 0.24% in 2022. This represents $20.1 billion spread across different sectors of illegal activities. By sector, we mean the various areas using crypto as a means or end to commit wrongdoing. Human trafficking, ransomware, protocol hacks, scams, black markets, terrorism, and even addresses subject to sanctions are all different sectors.

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Indeed, this year, the American services that manage the OFAC – Office of Foreign Assets Control – have decided to seriously extend this blacklist of addresses suspected of having illicit activities. This can be terrorists, but also opponents or enemies of the American administration and its allies. Iranians and North Koreans have been concerned for a long time. But this year, it is the Russians who have mainly contributed to the new entries on the list. And any added address produces de facto volume of illicit activity.

Crypto theft is a sure bet for illegal activity

Finally, the only sector that really increased, in addition to the one due to penalties not listed on the graph, is theft. The simple theft of crypto by trickery or protocol hacking increases by 7% year on year. Chainalysis mainly explains this decline in other sectors by the overall decline in market volumes. The less volume there is, the more difficult it is for crooks to find victims.

In conclusion, it can be noted that over the last few years, the volumes linked to these illegal activities have continued to decrease. In one more year we remain at less than 1%. But another relevant remark drew our attention in this file. Chainalysis teams indeed note that cryptocurrency is the only sector where such data is technically possible and politically acceptable. We would so much like to know this same volume in traditional finance! But until that day comes, be careful with your crypto and NFTs anyway, because bad things happen quickly.

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(Featured image by TheDigitalArtist via Pixabay)

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Michael Jermaine Cards is a business executive and a financial journalist, with a focus on IT, innovation and transportation, as well as crypto and AI. He writes about robotics, automation, deep learning, multimodal transit, among others. He updates his readers on the latest market developments, tech and CBD stocks, and even the commodities industry. He does management consulting parallel to his writing, and has been based in Singapore for the past 15 years.