According to crypto analytics firm Chainalysis, illicit activity in the sector intensified in 2022. In fact, $20.1 billion was sent illicitly via cryptocurrency in 2022. This represents 0.24% of all crypto transactions conducted in 2022. This figure is up from 2021, but still far behind the ATH of 2019.
Bear market doesn’t deter crime in the ecosystem
As it does every year, crypto analysis firm Chainalysis has released its estimates of illicit activity in the cryptocurrency sector in 2022. According to its public note on the subject, the volume of illicit crypto transactions increased in 2022. In fact, $20.1 billion was traded in crypto illicitly.
The amount is certainly significant, but very small compared to the overall volume of crypto transactions. Indeed, the $20.1 billion in illicit crypto trading volume represents only 0.24% of the volume of all crypto transactions conducted in 2022. In other words, 99.76% of crypto transactions in 2022 are not illicit.
Nevertheless, the rate of crypto use for illicit purposes has increased compared to the previous year. In fact, illicit crypto transactions accounted for only 0.12% of overall crypto volume in 2021.
Constitution of the volume of illicit crypto transactions in 2022
Chainalysis also provided details on the volume of illicit crypto transactions. Among other things, the analytics firm reports that 44% of the 2022 illicit transaction volume came from activities associated with entities sanctioned by the U.S. Treasury’s Office of Foreign Assets Control (OFAC). Another sizable portion of the 2022 illicit transaction volume came from crypto scams.
Chainalysis data needs to be put into perspective
It is true that Chainalysis is one of the leaders in assessing criminal activity in our industry. However, its data on the subject must be put into perspective for two main reasons.
As Chainalysis says, most of the illicit activity in crypto in 2022 (44%) came from actors under sanction by the U.S. Treasury’s Office of Foreign Assets Control (OFAC) since April 2022. Perhaps the largest of the players under OFAC sanction is cryptocurrency exchange Garantex, which accounted for the majority of sanction-related trading volume last year.
While it is sanctioned in the United States, Garantex continues to operate legally in Russia, where it is based. Yet crypto transactions conducted on the Garantex platform are considered illegal. This seems unfair, at least to non-US citizens who are not breaking any laws by buying or selling crypto on Garantex.
Furthermore, the Chainalysis study only looks at criminal activity conducted with on-chain data. It does not include off-chain criminal activity such as internal exchange transactions. With FTX’s experience, we know that these types of transactions can be fraudulent.
In conclusion, the Chainalysis study shows that overall, the share of illicit activities in the crypto ecosystem is only a small part of the overall volume. Interestingly, this proportion is continuously decreasing and approaching 0, despite the increase in 2022. The very existence of such a study is further proof of the importance of the transparency that Blockchain offers. In traditional finance, it is virtually impossible to make such an estimate of criminal activity…
I dream of a world where every citizen has total control over themselves, including their finances. I believe that Bitcoin is one of the tools that will achieve this revolution. Since 2019, I am learning about this cryptocurrency and spreading the word around.