Despite the decline in the cryptocurrency market, illicit transaction volume increased for the second year in a row in 2022, reaching a record high of at least US$20.1 billion, according to the latest annual Crypto Crime Report by blockchain data platform Chainalysis.
The report found that sanction-related transaction volume, largely associated with crypto exchanges in Russia, surged over 10 million percent from 2021 to 2022, accounting for the largest part (44%) of all illicit transaction volume last year.
The crypto community can however find plenty of positives to take away from this latest report. Unlike in 2021, this year, transactions associated with traditional forms of crypto crime — scams, terrorism financing, and fraud shops — all showed year-on-year decreases. Only transaction volumes related to stolen funds rose 7% year on year, and even this represented a significantly decelerated rate of growth compared to the previous year when the corresponding increase was almost 6x.
Overall, the share of all cryptocurrency activity associated with illicit activity remains encouragingly small — just 0.24% of the total cryptocurrency transaction volume.
“The events of 2022 have made clear that although blockchains are inherently transparent, the industry has room for improvement in this respect. There are opportunities to connect off-chain data on liabilities with on-chain data to provide better visibility, and the transparency of all transactions on-chain in DeFi is a standard that all crypto services should strive to achieve. As more and more value is transferred to the blockchain, all potential risks will become transparent, and we will have more complete visibility,” said Kim Grauer, Director of Research, Chainalysis.