Illicit cryptocurrency activity in 2021 and the first quarter of 2022 has decreased as a percentage of global cryptocurrency activityaccording to blockchain forensics firm CipherTrace.
The cryptocurrency sector has long had a reputation as a haven for illegal activity in some jurisdictions. Nevertheless, CipherTrace estimates that illicit activity was between 0.62% and 0.65% of global cryptocurrency activity in 2020. The firm reported that it has now fallen to between 0.10% and 0.15% of global activity in 2021..
In their report “Cryptocurrency Crime and Anti-Money Laundering,” published on Monday, CipherTrace highlighted that the top 10 decentralized finance (DeFi) hacks in 2021 and Q1 2022 netted attackers $2.4 billion.
More than half of that figure came from just two events, with the largest being the Ronin Network exploit from late March 2022.with a value of about USD 650 million, and the Poly Network hack of August 2021worth $610 million, which was returned by the anonymous hacker.
In a similar period of time, fines related to anti-money laundering (AML) in the banking sector increased dramatically; 80 institutions were fined in 2021, compared to only 24 in 2020according to Kyckr.
Although the total dollar amount of the fines decreased compared to 2020, last year banks paid $2.7 billion in fines for anti-money laundering or know-your-customer (KYC) violations, with the largest single fine amounting to about $700 million.
While significant sums have been mined in the crypto space, CipherTrace detailed the rapidly expanding crypto ecosystem, noting that total cryptocurrency market activity for 2020 was around $4.3 trillion, which grew to roughly $16 trillion of activity in the first half of 2021 alone.
CipherTrace says that The growth of the cryptocurrency market also brings with it increased scrutiny from the world’s regulators, who “are beginning to take decisive action to ensure that space is not a modern wild west.”.
Some of the most significant regulatory events cited in the report include United States President Biden’s executive order in March to study blockchain technology.Dubai establishing a virtual asset regulator, and the European Union’s proposed anti-money laundering laws.
CipherTrace added that organizations are going to have a “very real incentive to get fit” or face “heavy losses at the hands of the government.”adding that he expects existing threats in the crypto space to be the focus of future regulatory efforts.
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