Record $20 Billion in Illegal Crypto Transactions Traced in 2022
According to Chainalysis, over $20 billion worth of illegal transactions were conducted using cryptocurrency in the past year, marking a significant increase from previous years. The blockchain analysis firm, known for helping law enforcement and government agencies track cryptocurrency transactions, reported that the amount of illicit funds flowing through blockchains reached $18 billion in 2021.
Sanctioned Entities and Compliance Risks
A substantial portion (44%) of these illicit funds were linked to sanctioned entities, with Russian cryptocurrency exchange Garantex being specifically highlighted. Garantex was sanctioned by the US Treasury’s Office of Foreign Assets Control (OFAC) in April 2022, raising concerns about compliance risks for businesses under US jurisdiction. Chainalysis warned that transactions involving Garantex or other sanctioned crypto services could result in fines and potential criminal charges.
Changes in Crypto Crime Trends
While most categories of crypto crime saw a decrease in transaction volumes, “stolen funds” experienced a 7% increase. Chainalysis attributed this rise to the market downturn, suggesting that bear markets lead to lower revenue for crypto scams as users become more cautious during price declines. Despite the overall decrease in crypto crime, the proportion of cryptocurrency activity associated with illegal activities rose slightly from 0.12% in 2021 to 0.24% in 2022.
Challenges and Future Outlook
Although illegal cryptocurrency transactions represent a relatively small fraction of overall crypto activity, Chainalysis cautioned that its estimate of $20.1 billion for 2022 is likely to increase as new addresses are identified. The firm also noted that off-chain criminal activities, such as money laundering through crypto, were not included in its report. As more illicit activities come to light, the need for enhanced compliance measures and regulatory oversight in the crypto space becomes increasingly evident.
Overall, the record high of illegal transactions in 2022 underscores the ongoing challenges faced by authorities and businesses in combating financial crimes in the digital asset ecosystem. Stay tuned for further updates on developments in cryptocurrency regulation and enforcement efforts.