Data from blockchain analytics company Chainalysis revealed that illegal cryptocurrency use reached a record USD 20.1 billion last year as transactions involving organizations subject to United States sanctions increased sharply.
In 2022, the cryptocurrency market struggled as risk-taking decreased, and several crypto businesses went under. Regulators increased requests for more consumer protection due to the significant losses suffered by investors.
Despite declining overall crypto transaction volumes, Chainalysis reported that the value of crypto transactions involving illegal activities increased for the second year.
According to Chainalysis, transactions involving sanctioned entities grew more than 100,000 times in 2022 and accounted for 44% of all illicit activities in 2017.
Much of 2022’s unlawful volume was made up of funds received through the Russian exchange Garantex, which the United States Treasury Department sanctioned in April. Chainalysis added that most activities were “likely Russian users using a Russian exchange.”
Wallets are labelled as “illicit”, according to a Chainalysis spokeswoman, if they are a part of an approved company.
An email request for comment from Garantex is yet to receive a response.
Additionally, the United States imposed sanctions on cryptocurrency mixing services Blender and Tornado Cash last year, alleging that they were being used by hackers, including those from North Korea, to launder billions of dollars in proceeds from their cybercrimes.
While other illegal cryptocurrency transactions, such as those involving scams, malware, financing terrorism, and human trafficking, witnessed volume declines last year, stolen cryptocurrency funds increased by 7%.
According to Chainalysis, “The market downturn may be one reason for this. In the past, for example, cryptocurrency scams made less money during bear markets.”
According to Chainalysis, the USD 20.1 billion estimate only accounts for visible transactions on blockchains and leaves out “off-chain” crimes like false accounting by cryptocurrency companies. The figure does not include instances in which cryptocurrency is used as payment for non-crypto crimes, such as drug trafficking, or when it is the proceeds of such crimes.
The amount for 2021 was increased from USD 14 billion to USD 18 billion, according to the newspaper, as more frauds were found.
“We have to stress that this is a lower bound estimate – our measure of illicit transaction volume is sure to grow over time,” it added.