In 2022, the cryptocurrency market saw a significant increase in illegal transactions, totaling over $20 billion. This record high, as reported by Chainalysis, is expected to continue growing as more illicit activities are uncovered. Chainalysis, a blockchain analysis firm, assists law enforcement, government agencies, and other entities in tracing cryptocurrency transactions for compliance and other purposes.
Last year, Chainalysis recorded more illicit funds flowing through blockchains than in any previous year, with a total of $18 billion. However, a substantial portion (44%) of these funds were linked to sanctioned entities, particularly the Russian cryptocurrency exchange Garantex, which was sanctioned by the US Treasury’s Office of Foreign Assets Control in April 2022.
Transactions associated with Garantex or other sanctioned crypto services pose a significant compliance risk for businesses under US jurisdiction, potentially leading to fines and criminal charges. Despite a decrease in transaction volumes across most categories of crypto crime, “stolen funds” saw a 7% increase, possibly due to market downturns.
The overall share of cryptocurrency activity related to illegality slightly increased for the first time since 2019, rising from 0.12% in 2021 to 0.24% in 2022. Although this remains a small component of overall cryptocurrency activity, Chainalysis did not include “off-chain” criminal activity in its report, where proceeds from activities like drug trafficking are laundered through cryptocurrencies.
Chainalysis also noted that the estimated $20.1 billion for 2022 is likely to rise as new addresses linked to illicit activities are identified. Despite the increase in illegal transactions, it is essential to continue monitoring and addressing cryptocurrency-related crimes to maintain the integrity of the market.