Money Laundering Through Crypto Rises 30% to Hit $8.6 Bn

A new report by blockchain data company Chainalysis has revealed that crypto money laundering in 2021 rose by 30 percent to hit 8.6 billion dollars (approximately 977 billion shillings) compared to the same period in 2020.

Overall, cybercriminals have laundered over 33 billion dollars worth of cryptocurrency since 2017, with most of the total over time moving to centralized exchanges.

“For comparison, money laundering accounted for just 0.05% of all cryptocurrency transaction volume in 2021,” read the report in part.

Every year, billions of dollars worth of cryptocurrency move from illicit addresses and they end up at a surprisingly small group of services, many of which appear purpose-built for money laundering based on their transaction histories.

Although the trend is worrying, it is worth noting that part of it is attributed to the significant growth of both legitimate and illicit cryptocurrency activity in 2021.

“We also need to note that these numbers only account for funds derived from “cryptocurrency-native” crime, meaning cybercriminal activity such as darknet market sales or ransomware attacks in which profits are virtually always derived in cryptocurrency rather than fiat currency (legal tenders),” says the report.

Unlike fiat currency-based money laundering, the inherent transparency of blockchains clearly shows how criminals move cryptocurrency between wallets and services in their efforts to convert their funds into cash.

As such, these criminals depend on various crypto-currency services such as illicit addresses, DeFi protocols, centralized exchange, P2p exchange, mining, and gambling among others to convert their funds.

Data from the above figure indicate that for the first time since 2018, centralized exchanges didn’t receive the majority of funds sent by illicit addresses in 2020. Instead, criminals sent more money through DeFi protocols, which received 17 percent of all funds sent from illicit wallets in 2021, up from 2 percent in 2020.

The two highest-grossing forms of cryptocurrency-based crime in 2021 were theft and scamming. The DeFi platforms were controlled most by addresses associated with theft. They passed over 750 million dollars worth of cryptocurrency in total.

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Scammers, on the other hand, send the majority of their funds to addresses at centralized exchanges. Nevertheless, some criminals use cryptocurrency to launder funds from crimes that happen offline, and there are many criminal addresses in use that have yet to be identified.

Money Laundering

Money laundering activity, on the other hand, remained highly concentrated in 2021, but less so than in 2020.