A recent report published by Chainalysis compares the rates of money laundering between 2021 and 2020, with DeFi playing a significant role.
In 2021, $8.6 billion was laundered via cryptocurrency, a new report by the cybersecurity analytics provider Chainalysis reveals. While this marks a 25% increase from 2020, it’s well below the record number.
The highest-ever value laundered in cryptocurrency was $10.9 billion, recorded in 2019. It’s estimated that a total of $33.4 billion in crypto has been laundered since 2017.
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As noted in the Chainalysis report, the overall amount of funds laundered in crypto since 2017 is merely a drop in the water compared to the $2 trillion of fiat money laundered annually from offline crimes, listing drug trafficking as one of the examples.
Furthermore, the exact value of money laundered in offlines is far more difficult to determine than crypto due to the use of cash which can’t be easily traced.
The biggest difference between fiat and cryptocurrency-based money laundering is that, due to the inherent transparency of blockchains, we can more easily trace how criminals move cryptocurrency between wallets and services in their efforts to convert their funds into cash.
According to Chainalysis, the numbers used in the report derived solely from “cryptocurrency-native” crimes. This means criminal activity like “darknet market sales or ransomware attacks in which profits are virtually always derived in cryptocurrency rather than fiat currency.”
It was noted that for the first time since 2018, less than 50% of the laundered money was accounted for in centralized exchanges (CEX). This may point towards a behavioral change among crypto criminals.
The increase of DeFi protocols utilized for illicit addresses was astounding, soaring by nearly 2000%. Its share in 2021 was 17%, compared to just 2% in 2020.
The report discussed several case studies and instances of cybercrime, including the hack committed by North Koreans who stole around $400 million. According to Chainalysis, hackers strongly preferred utilizing DeFi while scammers were more drawn to CEXes due to their “relative lack of sophistication.”
Repeated instances of transactions just below the [$1000] threshold may indicate users are doing what’s known as structuring, meaning purposely breaking up large payments into smaller ones just below reporting thresholds in order to fool compliance teams.
There were 583 illicit addresses recorded in 2021 that received deposits worth at least $1 million. Breaking them up by asset, Bitcoin (BTC) accounted for just 19%, stablecoins for 57%, and Ethereum for 63%. Altcoins made up the largest share, accounting for 68% of those laundered going to the 20 largest illicitly utilized addresses.
