Crypto-Related Crime Rose By 79% In 2021

Crypto-related crimes rose to a high of $14 billion in 2021, per blockchain analytics company Chainalysis’s yearly Crypto Crime report released on Thursday.

This is an increase of 79% from the $7.8 billion in 2020, representing only 0.15% of the 15.8 trillion in crypto transactions volumes, the lowest ever.

For comparison, in 2019 the illegitimate share of all cryptocurrency transactions volume was 3.37%, and .02% last year, with the total volume of transactions spiking by 567% from 2020 total, according to Chainalysis.

“Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency,” Chainalysis said. “But the fact that the increase was just 79%—nearly an order of magnitude lower than overall adoption—might be the biggest surprise of all.”

Chainalysis showed that Decentralized Finance (Defi) was to blame for a significant part of all crypto-related crimes last year.

DeFi is a regularly used term for the multitude of financial tools and applications, that enable lending and borrowing of crypto assets without the need for a middle man such as a bank. DeFi is fully built and operated on the blockchain.

The ease of access to these tools can often be muddied by problems within a project’s code, shotty governance, or being outright scams.

Revenues from crypto-related scams were up 81% in 2021, as compared to 2020, $7.8 billion in total. Of the total, rug pulls- a malicious tactic in which a group of individuals, build a seemingly legitimate crypto project only to run away with an investor’s money-accounted for 37% of all crypto-related scam revenue, or more than $2.8 billion.

In concluding the report, Chainalysis said, “DeFi is one of the most exciting areas of the wider cryptocurrency ecosystem,” which brings “huge opportunities to entrepreneurs and cryptocurrency users alike.”

But the team would also go on to note, “DeFi is unlikely to realize its full potential if the same decentralization that makes it so dynamic also allows for widespread scamming and theft.

While 2021 was a record-breaking year for crypto crimes, I can only imagine the recent escapades from the past couple of months will lead to that being broken once more this year. The hope for the community is to get away from this narrative as it is beginning to sour the view of the industry in the eyes of the public.