Crypto money laundering up by a third in 2021, but still below record high

Time:2022-01-26 Source: 955 views Trending Copy share

The Chainalysis report details how cybercriminals are laundering their crypto funds in 2021 compared to the previous year, with DeFi protocols seeing the largest percentage increase in exploits.

A new Chainalysis report shows that $8.6 billion worth of money will be laundered through cryptocurrencies in 2021. That's a 25% increase from 2020, but still well below the high-water mark of 2019.

In 2019, $10.9 billion in value was laundered through cryptocurrencies. Since 2017, Chainalysis estimates that a total of $33.4 billion in cryptocurrencies has been used for money laundering.

Chainalysis noted that $33.4 billion in cryptocurrencies has been used for money laundering since 2017. By comparison, $2 trillion of fiat currency is used annually for money laundering, offline crimes such as drug trafficking. However, since untraceable cash is used in crimes committed offline, a reliable assessment of the amount laundered in fiat is more difficult to determine than in cryptocurrencies. The report states:

“The biggest difference between fiat and cryptocurrency-based money laundering is that because of the inherent transparency of blockchain, we can more easily track how criminals move cryptocurrency between wallets and use services to cash out cryptocurrency.”

According to the cybersecurity analytics provider, the cryptocurrencies used for money laundering come from “the native crime of the crypto world,” where “profits are almost always made in cryptocurrencies rather than fiat.”

For the first time since 2018, centralized exchanges (CEXs) accounted for less than half of the laundered value (47%) in crypto laundering cases, signaling a possible change in the behavior of cybercriminals. The utility of DeFi protocols for illicit addresses increased by nearly 2,000% from a 2% share in 2020 to 17% in 2021.

Hackers are more inclined to exploit DeFi, while scammers are inclined to CEX, which Chainalysis believes is because CEX is “relatively less sophisticated.”

“Mining pools, high-risk exchanges and mixers also saw a significant increase in value received from illicit addresses,” Chainalysis noted.

The proportion of 2021 funds reaching the top five money laundering services (58%) is higher than in 2020 (54%). However, the overall concentration of money laundering decreased in 2021, as 583 addresses received deposits worth at least $1 million, and in 2020, 270 such addresses were used.

By asset, altcoins have the highest concentration, as 68% of money laundered goes to the 20 largest deposit addresses used for illicit activities. Ethereum (ETH) is a close second with 63% and stablecoins with 57%, while Bitcoin (BTC) is by far the least concentrated, with only 19% going to the largest addresses.

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