Criminal activity has always been linked with crypto by governments and individuals who would rather see the assets banned. Despite widespread beliefs that only criminals use crypto, it is still significantly less than the criminal activity related to fiat currencies, with sources saying only about 1% of cryptocurrencies are used by criminals. Nevertheless, this does not mean that criminals are not using cryptocurrency and recent reports show that they are making bank.
Criminals Increase Crypto Holdings In 2021
Criminal crypto balances have been on a slow but steady climb in the last five years, according to a report from Chainalysis. But in 2021, their balances exploded along with the market. As more investors had moved into the market following the rise in popularity, so had criminals ramped up their activities. This went from petty scams to full-on hacks and attacks of major crypto exchanges.
The year marked the most significant growth in the balances of these criminals who held $11 billion in cryptocurrencies at the end of 2021, and this is from wallet addresses that have been associated with known illicit sources.
Compared to the previous year, criminals had grown their crypto balances by almost 4x, growing from just $3 billion at the end of 2020 to $11 by 2021.
Most of these funds came from stolen funds which made up 93% of all criminal balances. These stolen funds accounted for a total of $9.8 of the total balance. Darknet market funds made up $448 million of the total, while scams, fraud shops, and ransomware accounted for $192 million, $66 million, and $33 million respectively.
Crypto total market cap down to $1.78 | Source: Crypto Total Market Cap on TradingView.com
The report notes that criminal balances also “fluctuated throughout the year, from a low of $6.6 billion in July to a high of $14.8 billion in October.” This is because some of these funds can be liquidated when tracked on the blockchain or seized by law enforcement agencies.
Law Enforcement Clamps Down On Criminals
Law enforcement has increased activity around catching crypto criminals. The digital asset which allows for the movement of funds anonymously has been a growing choice among criminals and as such, law enforcement has had to up their game. This has been paying off in major ways.
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In 2021 alone, the IRS-CI had seized more than $3.5 billion worth of cryptocurrency. This also spread through to the US Department of Justice which had been able to recover millions of dollars in crypto used in ransomware attacks.
Most recently, the DOJ was able to seize $3.6 billion worth of bitcoin from the Bitfinex hackers. This comes after the hackers had moved 10,000 BTC from their wallets. It remains the largest asset recovery ever in cryptocurrency or fiat currency.
Featured image from Financial Times, chart from TradingView.com