Illicit Crypto Transactions Fell in 2020: Chainalysis Report

Criminals have always sought out ways to make a killing in any economic climate, and crypto has gradually grown into their playground. Crypto’s recent emergence and rise have seen cybercriminals coming into the nascent tech space.

Many financial regulators are pointing to the semi-pseudonymity of BTC as a viable ground for criminals to thrive, but data from blockchain intelligence firm Chainalysis suggests otherwise.

Ransomware Attacks Claim Top Spot In 2020

According to data released yesterday by blockchain and crypto watchdog Chainalysis, there have been improvements in fighting crypto-related crimes in 2020 than the year before. 

The document pointed to a fall in illicit transactions volume of cryptocurrency assets from $21.4 billion to $10 billion in 2020. These transfers were pinned at 2.1% in 2019 but fell to 0.34% in 2020. 

Mapping out the illicit transfer of crypto funds that made up the 0.34% in 2020, Chainalysis pointed to ransomware attacks as the most viable of the eight categories underlined. These premeditated malicious attacks replaced scams like the infamous PlusToken Ponzi Scheme of 2019. 

Although the 2019 racket brought in over $2 billion+ outstripping ransomware attacks at $350 million, the intelligence firm pointed out that these attacks accounted for 311% of the illicit crypto transaction volume in 2020.

Chainalysis said its estimates on ransomware attacks’ impact were modest as many attacks were not reported to the authorities. Experts are quoted as saying crimeware figures run as high as $20 billion in 2020 alone.

Even with the crypto space’s dire outlook, Chainalysis believes the tide is changing for the nascent industry due to regulators demanding more from crypto-facing companies. 

The financial agencies’ efforts have seen crypto criminals having to rely on a small number of service providers in the industry to exchange their ill-gotten wealth for fiat. In ranking the crypto businesses that most serviced crypto-related crimes, crypto exchanges made up the criminals’ favorite spot due to some providing money-laundering services or having lax customer-recognition programs.

Hotspots for Crypto Funds

Certain countries were ear-marked as likely destinations for illicit crypto funds. Russia saw many darknet funds coming in through illicit wallet addresses in 2020 through its Hydra darknet services.

The U.S, South Africa, China, United Kingdom, France, Vietnam also saw questionable funds flowing into their economies. China seems to have a dedicated ransomware attack firm called the Lazarus Group, which contributed a whopping 35% to the crimeware rise in 2020. 

The data presented by Chainalysis shows a lot of effort and government intervention in the crypto space is urgently needed. Financial regulators are also stepping up to the task with crypto exchanges mandated to institute a Know-Your-Customer (KYC) protocol as part of its customer onboarding program.

Lax compliance programs have seen exchanges have the United States Securities and Exchange Commission (SEC) knocking on their door, and Chainalysis believes in the end, criminals may end up leaving cryptocurrencies alone.

“In the long run, (compliance) efforts by exchanges will also remove some of the incentive to use cryptocurrency in criminal activity, as it will become much harder for cybercriminals to convert cryptocurrency into cash if they can’t use exchanges.”

The Battleline Has Been Drawn

Chainalysis has been at the fore-front of tracking criminal activities in the cryptocurrency space for some time now. In partnership with U.S authorities over the years, the crypto analytics firm has been able to bring cybercriminals to justice. The Department of Justice has repeatedly used its investigative tools to uncover criminal activities otherwise hidden from the public’s eyes.

Crypto exchanges like BitMEX have also partnered with Chainalysis to track and stop illicit transactions on their platform. This was in a bid to appeal to U.S authorities after the brainchild of the 100x Group was accused of aiding money laundering. The embattled exchange also made certain organizational restructuring and brought a new team to help out with its compliance programs.