Criminal activities In Crypto Industry Surge By 550% In 2021, DeFi Being The Primary Sector Of Crimes

• The number of criminal offenses related to cryptocurrencies doubled in 2021 from 2020, marking a total loss of $14 billion.

• Despite increasing illegal activities in the crypto industry, the total criminal activities are less than 1% compared to the total volume of cryptocurrency transactions.

• The primary target in the crypto industry has been the DeFi sector, which saw an increase of 335% from 2019 to 2020 and a massive increase of 1,330% from 2020 to 2021.

The year 2021 has been a great year for cryptocurrency. From developments to adoption, cryptocurrency has been a hot topic on the web throughout the year. However, some consequences follow, even if it is suitable for the crypto industry. The popularity and massive adoption attracted governments and various authorities, which created a demand for regulation. The need for regulation emerges from constantly increasing compromises of investor protection. And this comes from the fact of increasing hacks and scams in the crypto industry, the DeFi (Decentralized Finance) sector being the primary ecosystem for such events.

In 2021, the number of cryptocurrency frauds, hacks, and scams had almost doubled from 2020, when the loss was estimated to be about $7.8 billion and has reached a milestone of $14 billion in the loss. As per some reports from Chainalysis, in the first week of 2022, the total balance of illicit wallet addresses was found to be about $10 billion. As the reports explained, the illicit addresses here referred to all wallets that were somehow associated with criminal activities in the crypto industry, offenses including ransomware attacks, scams, hacks, and Ponzi schemes.

Criminal Activities Estimate Less Than A Percent!

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Even though the illegal activities have surged massively, the activities only estimated at 0.15% of the complete cryptocurrency transactions volume in 2021, which sits at $15.8 trillion, showing a growth of 550% from 2020. These figures are set to increase with time and could change if the analytics organization that reported it adds more illicit addresses of illegal transactions to the overall report.

Declining Crime

However, excluding the PlusToken Ponzi multibillion-dollar scheme of 2019, the total amount of transactions of cryptocurrencies linked with any form of crime or fraud has been showing a downtrend for a while now. Chainalysis also explained that around 0.34% of cryptocurrency transactions in 2020 were linked to illegal activities, which simultaneously reached 0.64%. The downtrend of illegal activity transactions might hint in two different directions, one being that illegal activities in the crypto ecosystem are actually declining or the bad actors are getting better at hiding their activities. Nothing could be said for this developing industry, and the reality still seems unclear.

DeFi – Most Suitable Sector For Criminal Activities

The report also included that the volume of transactions in the DeFi has increased by 912% since 2020, and it was tagged as the “new arena” of illegal activities that have constantly grown over time. In 2020, a total of $162 million worth of cryptocurrencies and tokens were stolen from various DeFi platforms, and it is estimated to be 31% of the total loss in the year. However, compared to 2019, the figures surged about 335% in a year. As per Chainalysis, in 2022, the total loss increased by 1,330%, reaching $2.3 billion.

The Chainalysis’ report research head, Kim Grauer, said that the surge in criminal activities in the DeFi ecosystem highlights that bad actors constantly make efforts to exploit new emerging technologies. He further explained that a massive surge in the utilization of DeFi protocols to launder money was observed this year when DeFi started to grow and gain popularity. However, it didn’t take much time for DeFi protocols themselves to become victims to crimes like hacking.