Illicit use of cryptocurrencies hit a record $20.1 billion last year as transactions involving companies targeted by U.S. sanctions skyrocketed.
The cryptocurrency market floundered in 2022, as risk appetite diminished and various crypto firms collapsed. Investors were left with large losses and regulators stepped up calls for more consumer protection.
Even as overall crypto transaction volumes fell, the value of crypto transactions related to illicit activity rose for the second year running.
Transactions associated with sanctioned entities increased more than 100,000-fold in 2022 and made up 44% of last year’s illicit activity
Funds received by the Russian exchange Garantex, which was sanctioned by the U.S. Treasury Department in April, accounted for much of 2022’s illicit volume.
The United States also imposed sanctions last year on cryptocurrency mixing services Blender and Tornado Cash, which it said were being used by hackers, including from North Korea, to launder billions of dollars worth of proceeds from their cyber crimes.
The volume of stolen crypto funds rose 7% last year, but other illicit crypto transactions including those related to scams, ransomware, terrorism financing and human trafficking, saw volumes fall.
Chainalysis said its $20.1 billion estimate only includes activity recorded on blockchain, and excludes “off-chain” crime such as fraudulent accounting by crypto firms.
The figure also excludes when cryptocurrencies are the proceeds of non-crypto-related crimes, such as when cryptocurrency is used as a means of payment in drug trafficking.