Chainalysis: Overall Impact of Crypto Crime Will Decline Further in 2022

Kim Grauer, director of research at Chainalysis, said that as law enforcement makes more use of the transparency offered by blockchain technology, crypto-related crimes will likely make up a smaller and smaller share of the overall industry in the coming year.

According to a Jan. 6 report by Chainalysis, the growth in legal cryptocurrency use “far exceeds the growth in criminal use.” The share of cryptocurrency trading volume related to illicit activity has never been lower, accounting for only 0.15% of trading volume in 2021.

She told Cointelegraph that, barring any "unusual criminal incidents," she expects the increase in legal cryptocurrency use relative to illicit use to continue until 2022.

Things look promising in the space, she said, as “the share of illicit transactions continues to decline” and “the narrative that cryptocurrencies are primarily a means of exchange for criminals is finally being discarded.”

“Victories in law enforcement continue to prove to bad actors that the inherent transparency of cryptocurrencies makes them an undesirable means of moving illicit funds. When it comes to illicit financing, cash is still king and that is unlikely to change.”

During 2021, rug pull became the scam of choice for crypto criminals. In 2021, fraud revenue increased by 82% to $7.8 billion, of which more than $2.8 billion came from rug pulls (refers to cryptocurrency developers withdrawing support, DEX liquidity pools or suddenly abandoning a project, without warning. away from investors’ funds).

However, Grauer said that doesn't necessarily mean that rug pulls will remain the most prevalent scam in 2022. Instead, criminals could “abuse new technologies” such as DeFi, NFTs, and DAOs as the space moves toward web3.

"We saw this (in 2021), especially in DeFi, where criminals not only targeted DeFi platforms for hacking or rug pull, but also began to use DeFi platforms more and more to launder money."

Additionally, Grauer said that while she does not expect a potential crypto bear market to affect the rates or types of crypto crime, a severe financial recession or depression could.

"When you consider the entire economic market -- not just the crypto market -- recessions and depressions can drive an increase in criminal activity," she said.

During 2021, law enforcement agencies around the world achieved many notable successes. In November 2021, the IRS Criminal Investigation Service announced that they had seized more than $3.5 billion worth of cryptocurrencies from non-tax investigations in 2021.

Despite the low percentage, cryptocurrency-based crime actually hit a record high in 2021, with illicit addresses raking in $14 billion for the year, up from $7.8 billion in 2020, according to Chainalysis.

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