Chainalysis report: Illegal crypto transactions halved in 2020

Source: Daily Planet

Criminals are always looking for ways to make money in any economic environment, and the crypto industry has gradually become their paradise. The birth and rise of the crypto market has allowed cybercriminals to enter the emerging technology field.

Many financial regulators have pointed out that BTC is often a breeding ground for criminals, but data from blockchain intelligence firm Chainalysis suggests otherwise.

Ransomware attacks were most active in 2020

According to data released yesterday by blockchain and crypto monitoring agency Chainalysis, efforts to combat crypto-related crime improved in 2020 compared to the previous year.

The document states that the illegal transaction volume of cryptocurrency assets fell from $21.4 billion in 2019 to $10 billion in 2020. The transfer rate was 2.1% in 2019, but fell to 0.34% in 2020. Cryptocurrency-related criminal income fell by more than half in 2020. In 2020, due to increased compliance with regulations by crypto exchanges and a decrease in fraud, the proceeds of crypto crime fell by more than $5 billion from about $10 billion in 2019.

Chainalysis said ransomware attacks were the most viable of eight types of attacks, accounting for 0.34% of illicit transfers of crypto funds in 2020. These premeditated malicious attacks replaced the infamous PlusToken Ponzi scheme of 2019.

Although PlusToken’s illicit revenue of $2 billion in 2019 exceeded the $350 million in transactions brought in by ransomware attacks, the intelligence firm noted that this was 311% of the illegal crypto trading volume in 2020.

Chainalysis said its estimates of the impact of ransomware attacks may be underestimated because many attacks are not reported to authorities. Chainalysis cited experts who said that economic losses caused by crimeware reached $20 billion in 2020 alone.

The future of crypto is still uncertain. But Chainalysis believes that the situation in this emerging industry is changing as regulators impose more requirements on crypto-related companies.

With the efforts of financial institutions, crypto criminals have to rely on a handful of service providers in the industry to convert their ill-gotten gains into fiat currency. In the ranking of crypto businesses that provide the most services for crypto-related crimes, crypto exchanges have become the favorites of these criminals due to some providing money laundering services or lax customer identification procedures.

Cryptocurrency fund gathering place

Certain countries have been listed as possible hubs for illegal crypto funds. In 2020, Russia discovered a large amount of darknet funds flowing in through illegal wallet addresses through the Hydra darknet service.

The United States, South Africa, China, the United Kingdom, France, and Vietnam have also seen suspicious funds flow into their economies. North Korea appears to have a dedicated ransomware attack company called Lazarus Group, which contributed up to 35% of the growth in crimeware attacks in 2020.

Chainalysis’ data suggests that a lot of effort and government intervention is needed in the crypto space. Financial regulators are also stepping up to the task, requiring crypto exchanges to have “KYC” protocols in place as part of their customer registration programs.

Chainalysis believes that criminals may eventually give up on cryptocurrencies as lax compliance procedures could lead to exchanges being targeted by the U.S. Securities and Exchange Commission (SEC).

“In the long run, (compliance) efforts by exchanges would also remove some of the incentive to use cryptocurrencies in criminal activity, as it would be harder for cybercriminals to convert cryptocurrencies into cash if they can’t use exchanges.”

The battle lines have been drawn

Chainalysis has been at the forefront of tracking criminal activity in the cryptocurrency space. Over the years, the crypto analytics firm has been able to bring cybercriminals to justice through its collaboration with U.S. authorities. The U.S. Department of Justice has used its investigative tools on numerous occasions to uncover criminal activity that would otherwise have been hidden from public view.

Crypto exchanges like BitMEX have also partnered with Chainalysis to track and block illegal transactions on their platforms in response to allegations that its parent company, 100x Group, facilitated money laundering. The troubled exchange has also made some organizational changes and brought in a new team to help it develop and implement its compliance program.