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CipherTrace Report Shows Decrease in Illicit Activity in Crypto Ecosystem

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Amid extreme market conditions, a June 13 report from CipherTrace details positive developments in the crypto ecosystem, suggesting a decline in crypto-related crime.

The report showed an increase in crypto trading volumes from $4.3 trillion in 2020 to $16 trillion in 2021. The firm claims that this exponential growth is why regulators are investigating the cryptocurrency ecosystem.

A decline in crypto crime

According to CipherTrace, illicit activities have decreased and now make up a small fraction of the entire crypto ecosystem. The firm estimates that illicit activity, which made up 0.62% to 0.65% of total cryptocurrency activities in 2020, has dropped to between 0.10 in 2021.

CipherTrace estimates that hackers made $2.4 billion in an analysis of the top ten DeFi attacks in 2021 and Q1 2022. The March 2022 Ronin Network exploit and the 2021 Poly Network attack make up almost half of the figure total.

While this sum is significant, the firm details that the rapidly expanding ecosystem makes it a small fraction of the overall market value.

CipherTrace cryptocrime and AML infographic

The report states that the cryptocurrency market grew by 1,456% between 2019 and March 31, 2022. The market peaked at $3 trillion in November 2021 after several cryptocurrencies rallied.

The firm also reported that most illicit activities have moved to DeFiNFT and state-of-the-art mixing services.

He stated that the figures used in the report do not reflect the real value of illicit activities. He said: “To warn, the fact is that not all illicit activity, whether in traditional financial channels, in crypto, or in other informal transfers of value, is known. So take any numbers you see from us or others with that perspective in mind.”

Regulators dive deep

Regulators have long raised concerns about people using the crypto market as a haven for illicit activity. The significant growth experienced therefore led to increased regulatory measures by governments to keep pace.

The report cited President Biden’s cryptocurrency executive order in March to study blockchain technology, the establishment of a virtual asset regulator in Dubai, and the European Union’s proposed anti-money laundering laws as examples of such regulatory attempts.

CipherTrace also added that most regulatory efforts would focus on reducing threats from the crypto ecosystem. This means that cryptocurrency organizations would come under increased regulatory scrutiny.

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