Money laundering using cryptocurrencies surged 30% last year against 2020, with at least $8.6 billion in digital tokens lost in various illicit schemes, according to a new report from crypto analysis firm Chainalysis, released on Wednesday. Money laundering is a process in which the source of stolen funds is disguised by transferring it to a legitimate business.
Overall, over $33 billion worth of crypto has been laundered since 2017, the firm estimated. Most of that money was moved through centralized exchanges – however, in 2021, cybercriminals turned to more technologically advanced decentralized finance (DeFi) applications which facilitate crypto-denominated transactions outside of traditional banks – 17% of the total was laundered through DeFi in 2021, up from only 2% in 2020.
Analysts say the surge in money laundering cases did not come as a surprise amid the notable growth of both legitimate and illegal crypto activity in 2021. According to the report, crypto mining pools, high-risk exchanges, and mixers also reported a rise in funds received from wallets tied to criminal activity last year. Mixers, for instance, are used to mix illegally obtained crypto funds with others, which helps hide the funds’ original source.
Analysts noted, however, that the figures they gave for 2021 represent only the funds laundered from “crypto-native” crime, like sales on the darknet or ransomware attacks. Payments there are made in crypto, not exchanged from fiat currencies. However, the real figures involving criminal payments laundered in crypto could be much greater.
“It’s more difficult to measure how much fiat currency derived from off-line crime – traditional drug trafficking, for example – is converted into [crypto] to be laundered. However, we know anecdotally this is happening,” Chainalysis said.
Analysts expect a further rise in crypto crimes this year. According to Kim Grauer, Chainalysis’ director of research, 2022 “is already off to a big start for NFT (non-fungible tokens)” crimes.
“This is definitely going to continue.”
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