New reports from Chainalysis found that illicit crypto activity spiked to an all-time high in 2022—but is still a relatively small problem.
Key Details
- Blockchain analysis firm Chainalysis revealed that an estimated $20.3 billion worth of cryptocurrency activity occurred between illicit accounts.
- Last year the U.S. sanctioned a greater number of crypto-related entities. The surge in sanctions is likely directly related to the growing illicit crypto activity.
- Nearly 44% of illicit activity occurred between sanctioned crypto businesses such as Tornado Cash and crypto exchange Garantex.
- Despite growing activity between sanctioned groups, illicit activity fell in nearly every other category that Chainalysis tracks.
- However, the company notes that the downward trending activity is typical in a falling market.
Why it’s news
As the crypto market has developed, cybercriminals have found that its relative anonymity provides an avenue to collect payment for illicit activities. For example, ransomware hackers frequently demand payment using some type of cryptocurrency like bitcoin.
The fact that these criminals are using government-sanctioned entities to conduct their illegal activity poses a problem for regulators working to determine the best way to monitor the crypto market.
Though $20.3 billion in illicit transactions seems like an overwhelming number, it is only 0.24% of all crypto activity in the last year. This is double the previous year’s 0.12% but still a small portion of all crypto transactions.
The estimate from Chainalysis is just a starting point. The firm will continue to analyze crypto transactions from last year and may find more activity than the initial report covers. In 2021, the analysis firm found an additional $4 billion after its initial assessment.
Backing up a bit
Following FTX’s collapse, regulators have started asking for closer monitoring of cryptocurrency markets. Regulators who served under the Trump and Obama administrations have suggested that crypto entities ought to provide basic customer protections, establish rules to provide stability, and consistently enforce the law.
Calls for regulating crypto are nothing new. The White House, the Department of Justice, the Securities and Exchange Commission, the Federal Reserve, and Congress have all called for closer monitoring of cryptocurrencies.
