2022 broke the record for illicit on-chain transactions, setting aside criminal investigations of failed crypto companies such as FTX, Celsius, Three Arrows Capital, Terraform Labs and others. According to a January 12 report by Chainalysis, the total value of cryptocurrency received from illicit addresses reached $20.1 billion last year.
The figures are not final, as the measure of illicit transaction volume grows over time as analysts identify new addresses associated with criminal activity. Furthermore, it does not include proceeds from non-cryptocurrency crimes, such as drug trafficking and balance sheet funds from the aforementioned failed companies, which are now under investigation in various jurisdictions around the world.
At this point, the total value of $20.1 billion slightly exceeds the same measure in 2021 ($18 billion) by 10%. However, it still represents an all-time record and significantly exceeds (by 60%) the 2020 marker, which stands at USD 8,000 million.
These figures are explained by the fact that 44% of illicit transactions in 2022 correspond to sanctioned entities: Last year, the United States Office of Foreign Assets Control (OFAC) launched some of its “most ambitious” crypto-sanctions and difficult to apply. Sanctions-related transaction volumes increased so dramatically that they couldn’t even be included in the charts due to scaling issues. Chainalysis assesses this growth at the 10% million mark.
The report cites the example of the Garantex cryptocurrency exchange. The Russian platform continued to operate while listed on OFAC’s sanctions registry in April, hosting the bulk of sanctions-related transaction volume in 2022.
As Eric Jardine, lead cybercrime research at Chainalysis, explained to Cointelegraph, the report counts wallets as “illicit” when they are part of a known illicit entity, such as a dark web marketplace or sanctioned platform. Personal or non-hosted wallets can be tagged as illicit if they have funds stolen in a hack. Nevertheless:
“If a personal/non-hosted wallet sent money to Tornado Cash after its designation, that wallet would not be tagged as illicit for that activity, but the transaction volume would be considered ‘illicit’ because it involves funds received by an illicit entity.”
In early January, the UK National Cyber Crime Unit launched a cryptocurrency unit to investigate cyber incidents in the UK involving the use of cryptocurrencies. This move aims to increase the focus of the application of crypto assets in the country amid the government’s call to eliminate “dirty money” in the country.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.