24 Feb Cybercriminals laundered $8.6 billion worth of cryptocurrency in 2021, according to latest report

A report by security company Chainalysis has found that cybercriminals laundered $8.6 billion worth of cryptocurrency in 2021. This was a 30% increase year on year compared to 2020.

The latest figure makes up a significant fee of the $33 billion worth of funds cybercriminals have mined over the past five years since 2017.

Kim Grauer, Director of Research at Chainalysis commented on the findings: “Cybercriminals dealing in cryptocurrency share one common goal: Move their ill-gotten funds to a service where they can be kept safe from the authorities and eventually converted to cash. That’s why money laundering underpins all other forms of cryptocurrency-based crime. If there’s no way to access the funds, there’s no incentive to commit crimes involving cryptocurrency in the first place.”

Researchers from Chainalysis found that while billions of dollars’ worth of cryptocurrency moves from illicit addresses every year, most of it ends up at a surprisingly small group of services. 

For the first time since 2018, centralised exchanges didn’t receive the majority of funds sent by illicit addresses last year, instead taking in just 47%. DeFi protocols make up much of the difference, receiving up to 17% of funds send from illicit wallets in 2021; a rise from 2% the previous year. This translates to a 1,964% year-over-year increase in total value received by DeFi protocols from illicit addresses, reaching a total of USD 900 million in 2021.

Explaining what might have caused the uptick in use of DeFi protocols, Kim said, “Many of the hacks we saw this year were of DeFi protocols, so it makes sense that the funds were sent to DeFi services that can handle large amounts of liquidity from really any token you can imagine. We also know that criminals are always the fastest to adapt to the use of new technologies to evade detections, and this year was no different.”

Another insight from the Chainalysis research uncovered the difference between the two preferred criminal methods for cryptocurrency-based crime in 2021: Theft and scamming. Addresses associated with theft sent just under half of their stolen funds to DeFi platforms — over USD 750 million worth of cryptocurrency in total. However, scammers sent the majority of their funds to addresses at centralised exchanges. Kim explained: “This may reflect scammers’ relative lack of sophistication. Hacking cryptocurrency platforms to steal funds takes more technical expertise than carrying out most scams observed, so it makes sense that those cybercriminals would employ a more advanced money laundering strategy.”

The report does make it clear that although there is a significant uptick in the use of crypto for money laundering, the volume represents a small fraction of the total money laundering market, the large percentage of which is still carried out with traditional, flat currency.