Chainalysis provides a whole bunch of studies and reports on the world of Bitcoin and cryptocurrency. Among the various highly anticipated reports, there is the classic “Crypto Crime Report” which annually reviews the state of illegal activities in the Bitcoin and cryptocurrency world.
This report is published in February of each year, but Chainalysis usually publishes a first blog post at the very beginning of each year revealing the main points of this upcoming report. This was done on January 6, 2022, in this blog post: “Crypto Crime Trends for 2022: Illicit Transaction Activity Reaches All-Time High in Value, All-Time Low in Share of All Cryptocurrency Activity
The first thing that will jump out at Bitcoin and cryptocurrency opponents in this report is that the amount of transactions of Bitcoin and cryptocurrencies used for illegal activity in 2021 has reached a new All-Time High. Addresses considered illicit thus received $14B during the year, which is $7.8B more than in 2020, and $2.3B more than in 2019, which was the record year in this area:
This might give material for opponents of Bitcoin and cryptocurrency.
However, this is where the line between absolute and relative numbers lies. If in absolute numbers, a new ATH has been reached, in relative numbers, we see a completely different trend. An extremely reassuring trend.
The total transactions in Bitcoin and cryptocurrencies analyzed by Chainalysis in 2021 reached $15.8T. This represents a +567% increase over the total amount of transactions analyzed in 2020. Given the phenomenal growth rate of Bitcoin and cryptocurrency adoption in 2021, it makes sense that the amount of illicit transactions is also increased.
However, this increase in the use of cryptocurrencies by criminals was “only” 79%. In relative terms, this represents only 0.15% of the total amount of transactions made by criminals:
The decrease is significant compared to 2020 and even more so compared to 2019 when this figure reached 3.37%. This means a 95.5% decrease! Make that count: the ratio of the relative total amount of transactions made by criminals to the total amount of legal transactions made in the cryptocurrency world has dropped by 95.5% in one year.
As always, Chainalysis may refine its numbers further by the time the report is published in February 2022. Nevertheless, the trend is clear to me: the adoption of Bitcoin and cryptocurrencies is accelerating. The use of these new technologies by criminals is getting smaller and smaller. While the $14B figure is still too high in absolute terms, things are moving in the right direction.
The reason for this is simple: the means of control and surveillance have continued to improve to the point that criminals prefer to use their number one solution for criminal activities. The American dollar, whether in cash or via the banking system
The upcoming Chainalysis report will also show that in 2021, it is via stolen funds that the majority of crimes were committed in the cryptocurrency world:
Revenue from scams reached $7.8B in 2021. Of this total, $2.8B came from people who were tricked by fake cryptocurrency projects. I can't say it enough: if something is too good to be true, it's a scam! Stay away. Don't let greed or gullibility cause you to lose money in stupid ways
Chainalysis also shows us that the rise of DeFi represents a new playground for criminals in the cryptocurrency world with $2.2B of funds stolen on DeFi protocols in 2021. This represents a very significant acceleration since the number of funds stolen on DeFi protocols was still only $162M in 2020 :
A new playing field means greater difficulties for the authorities to control it. It is therefore logical that the growth of funds received for illicit services is exponentially increased in the world of DeFi in 2021 :
The increase is almost 2,000% as you can see. This should make you extra cautious if you choose to invest in projects outside of Bitcoin.
Final Thoughts
I will probably talk about this data again when Chainalysis publishes its “2022 Crypto Crime Report” in February 2022. In the meantime, I'll keep in mind three key points:
While the adoption of Bitcoin and cryptocurrencies has exploded in 2021, there has been a significant drop in usage for illegal activities in relative numbers.
The majority of scams focus on users by attempting to exploit their greed and gullibility. So you need to be extra careful not to lose the fruits of your labor to scams.
Even if the report doesn't mention it, the powerful people at the head of the current system would be better off focusing on the criminals' favorite vehicle for funding their illegal activities: the US dollar through the fiat system. Of course, this should remain wishful thinking as you can imagine. Nevertheless, I would have made my appeal in this sense.
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