According to data from blockchain forensics firm CipherTrace, illicit cryptocurrency activity has declined in 2021 and the first quarter of 2022 as a percentage of overall cryptocurrency activity.
The cryptocurrency industry has long enjoyed a reputation in some jurisdictions as a safe haven for illicit activity. However, CipherTrace estimates that illicit activity accounted for 0.62% to 0.65% of all cryptocurrency activity in 2020. In 2021, that has dropped to between 0.10% and 0.15%, the company reported.
Source: CipherTrace
In its cryptocurrency crime and anti-money laundering report published on June 13, CipherTrace outlined the top 10 decentralized finance (DeFi) hacks in 2021 and the first quarter of 2022, netting attackers $2.4 billion.
More than half of this figure came from just two incidents, the largest being the Ronin Network hack at the end of March 2022 with a loss of approximately $650 million, and the Poly Network hack in August 2021 with a loss of $610 million , most of which were returned by anonymous hackers.
Anti-money laundering (AML)-related fines in the banking sector have increased significantly over a similar time frame, with 80 institutions being fined in 2021, up from 24 in 2020, according to Kyckr.
While total fines were down from 2020, banks paid $2.7 billion worth of fines last year for AML or know-your-customer (KYC)-related breaches, with the largest single fine totaling about $700 million Dollar.
While the scale of stolen funds in the crypto space is large, CipherTrace detailed the rapidly expanding crypto ecosystem, noting that the total crypto market activity in 2020 will be about $4.3 trillion, growing to about 160,000 in the first half of 2021 alone. One hundred million U.S. dollars.
CipherTrace said the growth of the crypto market has also brought increased scrutiny from regulators around the world, who are "beginning to take decisive action to ensure that the space is not just a modern-day Wild West."
Some of the most significant regulatory events mentioned in the report include U.S. President Joe Biden’s crypto executive order in March to study blockchain technology, Dubai’s establishment of a virtual asset regulator, and the European Union’s proposed anti-money laundering laws.
Organizations will have "very real incentives to move forward," CipherTrace added, or "governments will face significant losses," adding that threats in the crypto space are expected to be a focus of future regulatory efforts.
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