Report: Only 0.24% of Crypto Transactions Involved Illicit Activity in 2022

The cryptocurrency industry experienced adverse events in 2022, ranging from thefts, hacks, and rug pulls, with the implosions of reputable companies such as FTX, Three Arrows Capital (3AC), Celsius, and Voyager Digital. 

Despite the number of suspicious activities, only 0.24% of transactions were involved in unlawful schemes last year. 

Crypto Industry Losses $20.1B in 2022

According to a yearly report released by blockchain analytics firm Chainalysis on January 12, 2023, the above percentage only represents illicit activities that can be measured on-chain. 

The company disclosed that the shares significantly increased from its previous records of 0.12% in 2021 to 0.24% in 2022.  The year ended with the industry losing a whopping sum of $20.1 billion to bad actors.

However, the figures are excluded from proceeds obtained from non-crypto-native crimes, such as drug trafficking involving digital assets as a means of payment. 

The blockchain analytics company found that proceeds from this type of unlawful activity reached $18 billion compared to the $14 billion recorded in 2021. 

Despite the large sum generated from illicit activities in 2022, the figure accounts for less than 1% of the overall transaction volumes last year.

“Overall, illicit activity in cryptocurrency remains a small share of overall volume at less than 1%. It’s also worth keeping in mind that despite this year’s jump, crime is trending downwards as a share of all crypto activity. Our full 2023 Crypto Crime Report will dig into the details of the criminal activity behind that 0.24%, as well as what our on-chain analysis reveals about the market failures of the last year,” the report reads. 

Sanctioned Entities Processed 44% of Illicit Volume

The American-based company also noted that 44% of 2022’s illicit transaction volume came from activity associated with sanctioned entities such as Tornado Cash which was blacklisted by the United States Office of Foreign Assets Control (OFAC) in August 2022. 

The authorities revealed that the platform had been used to launder around $7 billion worth of crypto assets since its inception in 2019. 

Other examples of a sanctioned entity include the crypto exchange Garantex, which was accused of helping bad actors launder criminal proceeds on the platform. The Russian-based exchange entered the government’s blacklist in April 2022.

According to the Chainalysis report, Garantex contributed most of the sanctions-related transaction volume last year. 

It is important to note that transaction volumes declined across all conventional categories of crypto crimes except for stolen funds, representing 7% shares of the total transaction volumes year-over-year.