Cryptocurrency-based crimes hit an all-time high in 2021, according to a new report by blockchain data platform Chainalysis, with scammers raking in $14 billion USD in stolen funds.
The firm released a preview of its 2022 Crypto Crime Report on Thursday ahead of the full release in February. It found that illicit crypto addresses received $14 billion USD over the course of the year, nearly double the amount of money illegally traded in 2020. Stolen funds, fraud shops, ransomware, scams and terrorism financing were among the ways criminals made their money.
The number of stolen funds is a fraction of the $15.8 trillion USD total transaction volume across all cryptocurrencies tracked by Chainalysis. The firm adds that illicit activity’s share of cryptocurrency transaction volume is at its lowest ever, representing just 0.15% of crypto transactions.
“Crime is becoming a smaller and smaller part of the cryptocurrency ecosystem,” the report says.
Chainalysis attributes the growing number of crypto crimes in part to the rise of decentralized finance, or DeFi, and its potential for misuse. Over $2.8 billion USD stolen from victims came from rug pulls, a term used for a cryptocurrency project that takes money from investors and then drains the funds. The firm speculates that because it is relatively easy to create new DeFi tokens and get them listed on exchanges, scammers continue to make a profit.
About $3.2 billion USD worth of cryptocurrency was stolen in 2021, mostly from DeFi protocols that sometimes have errors in their smart contract codes.
“DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem, presenting huge opportunities to entrepreneurs and cryptocurrency users alike,” the report says. “But DeFi is unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft.”