Chainalysis, a company that specializes in analyzing transactions on the blockchain, has released its long-awaited report on illicit cryptocurrency transactions in 2021. Over the past year, these transactions amount to $14 billion. On the other hand, this represents just 0.15% of the total amount of transactions.
Criminal activity related to cryptocurrencies is breaking a record…
This is going to give grist to the opponents of Bitcoin (BTC) and cryptocurrencies in general. Indeed, Chainalysis has just published an excerpt from its latest annual report, Crypto Crime, which will be available next February.
As it does every year, this report is dedicated to criminal activity involving the use of digital assets. Publisher of the report, Chainalysis has become known for its careful analysis of fraudulent transactions on various blockchains.
What about the year 2021? Chainalysis tells us that illicit transactions in crypto-assets were around $14 billion, a 79% increase from the previous year ($7.8 billion).
This 14 billion represents a new record in value over a year. This number is not surprising in itself, as the use of cryptocurrencies has exploded in 2021. Now, it almost makes sense that this increase would affect all sectors, including illegal ones.
… but that activity has dropped in volume by 2021
So the cryptocurrency bashers might stop at that number and the mainstream press has taken care of that for them. However, there is one figure that we find more interesting and that almost goes unnoticed by some.
We are talking about the rate of illicit transactions in relation to the totality of cryptocurrency transactions. Now, again according to Chainalysis, the former represented only 0.15% in 2021, a 56% drop from the previous year (0.34%).
When compared to 2019, the drop is even more impressive as this rate was 2.1%. Furthermore, while the rate of illicit transactions increased by 79%, the total volume of transactions increased by 567% in 2021 compared to 2020.
Since the numbers are stubborn, the only conclusion that can be made is that the total volume of cryptocurrency transactions has increased much faster than the illicit cryptocurrency transactions.
Decentralized finance (DeFi), a major part of illicit transactions
The excerpt from the Chainalysis report tells us that the DeFi sector is responsible for the majority of cryptocurrency-related criminal activity in 2021. Again, this is not surprising for anyone involved with digital assets.
Indeed, the use of DeFi exploded in 2021, allowing for the creation of many protocols. However, many of these protocols had certain security vulnerabilities or even were pure scams. The SQUID token is a prime example.
Thus, out of $3.2 billion in cryptocurrencies stolen in 2021, $2.2 billion came directly from decentralized finance protocols.
Despite these large numbers, Chainalysis remains optimistic about the potential and opportunities offered by DeFi. However, it will be necessary to correct the scams in order for it to be massively adopted.