Illicit use of cryptocurrencies reached a record high of $20.1 billion in 2022, according to blockchain analytics firm Chainalysis.
What Happened: Transactions involving companies targeted by U.S. sanctions skyrocketed during this time, as the value of crypto transactions related to illicit activity rose for the second year in a row.
“We have to stress that this is a lower bound estimate — our measure of illicit transaction volume is sure to grow over time as we identify new addresses associated with illicit activity,” the report stated.
Notably, 44% of the illegal transaction activity in 2022 was connected to entities that are under sanctions.
The Office of Foreign Assets Control (OFAC) implemented some of its toughest crypto sanctions yet last year, but many of these sanctions were difficult to enforce.
Citing an example of the Russia-based crypto exchange Garantex, Chainalysis said it was a major contributor to transactions linked to sanctioned entities and despite being sanctioned by OFAC in April 2022, Garantex was able to continue operating without consequence.
The U.S. also imposed sanctions on cryptocurrency mixing services Blender and Tornado Cash, which were being used by hackers to launder proceeds from their cyber crimes.
Why It Matters: The volume of stolen crypto funds rose 7% last year, but other illicit crypto transactions, such as those related to scams, ransomware, terrorism financing and human trafficking saw a decrease in volume.
"The market downturn may be one reason for this," Chainalysis said in its report.
"We've found in the past that crypto scams, for instance, take in less revenue during bear markets," it added.
The firm also noted its estimate of $20.1 billion only included activity recorded on the blockchain and excluded off-chain crime such as fraudulent accounting by crypto firms.
The figure also does not include when cryptocurrencies were the proceeds of non-crypto-related crimes, such as when they were used as a means of payment in drug trafficking.
The firm revised the figure for 2021 from $14 billion to $18 billion, as more scams were discovered.
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