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Cyber crime and crypto 

The use of cryptocurrencies for illicit activities reached an all-time high of $20.1 billion last year, according to a report by blockchain analytics firm Chainalysis.

The report revealed that transactions involving companies targeted by U.S. sanctions skyrocketed, making up 44% of last year’s illicit activity.

The cryptocurrency market has been struggling in recent months, with a decrease in risk appetite and several crypto firms collapsing.

As a result, investors have suffered significant losses, and regulators have increased calls for greater consumer protection.

Daylight robbery 

Despite the overall decrease in crypto transaction volumes, the value of crypto transactions related to illicit activity has risen for the second year in a row, according to Chainalysis. Transactions associated with sanctioned entities increased more than 100,000-fold in 2022.

Chainalysis pointed to the Russian exchange Garantex, which was sanctioned by the U.S. Treasury Department in April, as a major contributor to the illicit volume. A spokesperson for Chainalysis stated that wallets are considered “illicit” if they are part of a sanctioned entity.

Last year, the United States also imposed sanctions on cryptocurrency mixing services Blender and Tornado Cash, which were being used by hackers, including those from North Korea, to launder billions of dollars from their cyber crimes.

While the volume of stolen crypto funds rose 7% last year, other illicit crypto transactions, such as those related to scams, ransomware, terrorism financing, and human trafficking, saw a decrease in volumes. Chainalysis attributed this to the market downturn, stating, “We’ve found in the past that crypto scams, for instance, take in less revenue during bear markets.”

Beware 

It is important to note that Chainalysis’s $20.1 billion estimate only includes activity recorded on blockchain and excludes off-chain crime such as fraudulent accounting by crypto firms. The figure also excludes when cryptocurrencies are the proceeds of non-crypto-related crimes, such as when cryptocurrency is used as a means of payment in drug trafficking.

“We have to stress that this is a lower bound estimate – our measure of illicit transaction volume is sure to grow over time,” the report stated, noting that the figure for 2021 was revised to $18 billion from $14 billion as more scams were discovered.

It is clear that the illicit use of cryptocurrencies is a growing concern and one that regulators, law enforcement agencies, and the crypto industry must work together to address. The use of blockchain analytics and other technology can help to identify and prevent illegal activities, but it is clear that more needs to be done to protect consumers and prevent the abuse of this revolutionary technology.

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