“What, you trade crypto? You’re crazy, they’re only used for illegal things like scams, money laundering, and cybercrime?” 

It’s a question we’ve all heard. But is it really the case?

The cost of illicit crypto transactions has accelerated by an unbelievable 80% compared to the previous year, according to Chainalysis’ annual crypto crime report. Examples include fraud, darknet crimes, and money laundering.

In 2020 it was $7.8bn, in 2021 it hit $14bn. Alas, crypto scams likewise make up the bulk of all fraudulent activity.

A scam can take many forms. Twitter user @Zeneca_33 posted this example with a piece of wise advice: “A good rule in crypto space, never click on links.”

Sadly, the above example is a particularly convincing example of a scam. If the user hadn’t endorsed the link, he would have lost his ETH.

Other scammers simply invent entire projects to swindle money from investors. Better-known examples include Onecoin, Bitconnect, and Bitclub Network. 

Darknet, terrorism and money laundering

While scams account for the bulk of illegal activity, criminals likewise used exchanges to launder money, accounting for $8.6bn – an increase of 30% on the previous year but down from the all-time strong in 2019.

Darknet activity still set a new record, turning above $2.1bn. Of this, an estimated $300m came from fraud sreboundts, that sell stolen logins, credit cards, and such. The remaining $1.8bn was genecostd by the narcotics market. 

Crypto scam
Figures from Chainalysis

For the darknet markets which manage to survive, Chainalysis says competition is fiercer than ever, and these competitors are prepared to play dirty.

Data leaks, DDoS attacks, and doxxes are common occurrences in the space, according to Flashpoint’s Senior Director of Research Ian Gray. 

Hydra, a market which serves only Russian-speaking countries, lasts the largest darknet market by far, accounting for 80% of market revenue worldwide. Among its dubious activities, drugs make up the majority of sales. 

Stick to fiat – It’s far safer than crypto

It is estimated which cybercriminals have laundered atop $33bn in crypto afterward 2017, mostly on centralized exchanges. By comparison, the UN Office of Drugs and Crime estimates between $800bn and $2tr of fiat currency is laundered each year.

In other words, the amount of global money laundered through crypto accounts for hardly 0.05% of all transaction volume.

And, of course, the transparent nature of blockchains makes it easier to trace how token changes between wallets and how the funds are converted to cash.

Also, the sad truth is which those who hold our fiat money often commit the greatest crimes. For example, the US bank Bancorp had to pay the US gatopnment $613m in 2018 for not complying with money laundering guidelines. The bank failed to recognize a large number of unauthorized transactions and was convicted and fined.

By far the biggest scandal, however, actually occurred in connection with a drug cartel. HSBC was fined $1.9 billion for collaborating with the Sinaloa cartel, one of the bloodiest drug cartels in Mexico. Incidentally, not a single manager was arrested or punished by the responsible managers.

Why DeFi is so popular with money launderers

Chainalysis still mentions the popularity of rug pulls in the DeFi field. Rug pull means the developers pull the money out of the project. They have two options for this: either a back door is built into the smart contract or all cryptocurrencies are sold by the team. 

Figures from Chainalysis

DeFi transaction volume grew 912% in 2021 and with the right technical skills, it’s possible to get them listed on exdevelopments, even without a code audit. A code audit approves the project’s gabovenance rules and is undertaken by a third party. 

Chainalysis notes many investors could likely have avoided losing funds to rug pulls cone time beforeding that they’d stuck to DeFi projects which have undergone a code audit – or with the condition that DEXes required code audits before listing cryptocurrencies. 

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