Crime involving cryptocurrency reached an all-time high of $14 billion last year, a record that comes as regulators seek for greater control over the fast-growing sector.
Crypto received via digital wallet addresses associated with illegal behavior, including scams, darknet markets, and ransomware, increased by 80 percent year on year, according to blockchain researcher Chainalysis. However, the activity accounted for only 0.15 percent of total crypto transactions.
Overall volumes are expected to reach $15.8 trillion in 2021. In addition, digital assets, ranging from bitcoin to non-fungible tokens, will rise in popularity in 2021 as institutional investors and giant corporations adopt them.
Newcomers have been enticed to the idea of quick returns claimed by cryptocurrency enthusiasts and hope that bitcoin will provide a hedge against rising inflation. Nonetheless, cryptocurrencies are still vulnerable to uneven regulation, leaving investors with few options in case of fraud.
From Washington to Frankfurt, financial regulators have expressed concern about the potential of cryptocurrency for money laundering, with some asking Congress to give them more authority over the industry.
“Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being imposed by governments, and worst of all victimizes innocent people around the world,” Chainalysis stated.
Moreover, it stated that a surge in scams and theft at decentralized financing (DeFi ) platforms was driving the crime wave. DeFi sites, which provide lending, insurance, and other financial services while avoiding traditional intermediaries like banks, have been plagued by underlying code and opaque governance faults.
Overall, bitcoin theft has increased more than fivefold since 2020, with over $3.2 billion in coins stolen last year. Approximately $2.2 billion of the funds were taken through DeFi sites.
Scams on DeFi platforms, such as “rug pulls,” in which developers build up fake investment possibilities before fleeing with clients’ money, reached $7.8 billion, an 82 percent increase, according to Chainalysis.