The amount of funds linked to cryptocurrency-related crime rose by almost 80% last year, but was crowded out by a massive increase in adoption among legitimate users, new figures show.
According to a report from blockchain data platform Chainalysis, illicit addresses received $14 billion worth of cryptocurrency over the course of 2021, up from $7.8 billion the year before. However, total transaction volume across all cryptocurrencies rose by 567% from 2020 highs, totalling $15.8 trillion.
While the quantity of illicit transactions should not be downplayed, the fact that the increase was “nearly an order of magnitude lower than overall adoption” is the biggest surprise, Chainalysis says. In total, transactions involving illicit addresses accounted for just 0.15% of overall traffic.
However, the Chainalysis team did add that this percentage is susceptible to change, as a result of new information that may come to light. “This figure is likely to rise as Chainalysis identifies more addresses associated with illicit activity and incorporates their transaction activity into our historical volumes,” the report explained.
Pulling the rug
The majority of illicit transactions were linked to scams, either in the form of identity theft or other types of scheme. Scam revenue rose by more than four-fifths (82%) last year, reaching $7.8 billion, more than $2.8 billion of which came from so-called rug pulls.
A rug pull is a type of scam whereby the scammers go to great lengths to present themselves as a legitimate project with high potential. However, once the victims invest their money, they simply grab it and leave.
The figures for rug pull losses represent only the value of investor funds that were stolen, and do not account for the subsequent loss of value in the fraudulent token, following the rug pull. Usually, after the scammers disappear, the token loses all of its value almost instantly.
Roughly half of all rug pulls that Chainalysis tracked last year involved decentralized finance (DeFi) projects. Chainalysis also said that almost all of the value that was lost to rug pulls in 2021 (90%) came from one fraudulent exchange, Thodex, whose CEO disappeared.
Malware (opens in new tab) is often used for crypto scams, as well, with fake wallets and exchange apps frequently popping up on the web.
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