By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Cryptocurrency-linked crime surged to a record high last year in terms of value, with illegal addresses receiving $14 billion in digital currencies, up 79% from $7.8 billion in 2020, according to a blog from blockchain analysis firm Chainalysis released on Thursday.

Chainalysis reported that illicit addresses had $10 billion in cryptocurrencies as of 2022. The majority of these cryptocurrencies were held by crypto-theft wallets.

Illicit addresses refer to wallets that are tied to criminal activity such as Ponzi schemes, ransomware and fraud.

However, the illicit activity’s share in total crypto transaction volumes remained at 0.15% for 2021. The total transaction volume grew to $15.8 trillion in 2018, more than 55% higher than the 2020 level.

Chainalysis however stated that the figure of 0.15% could rise as Chainalysis identifies additional addresses associated with illegal transactions and includes them in the overall volume.

Chainalysis’s last report on crypto crime stated that 0.3% of all 2020 crypto transactions were associated with criminal activity. This number is now at 0.62%.

Chainalysis stated that criminal abuse of cryptocurrency can create huge obstacles to continued adoption. It also increases the possibility of government restrictions being imposed and, worst, it victimizes innocent people all over the globe.

The underlying trend suggests that crime, with the notable exception of 2019, which was a high-profile year of crypto-crime largely because of the PlusToken Ponzi scheme worth multibillions of dollars, has declined to be a significant part of cryptocurrency.

Reports also indicated that the rise in Decentralized Financing (or DeFi), which facilitates cryptocurrency-denominated lending, was a major contributor to increased thefts and frauds.

DeFi platforms were able to steal $162million worth of cryptocurrency in 2020. This was just 31% of all the stolen crypto currency for the entire year. This represented an increase of 335% over what was stolen from DeFi platforms during 2019.

Chainalysis reported that this figure increased 1,330% to $2.3 Billion in 2021.

DeFi volume of transactions jumped 912% by 2021. Chainalysis reported that outsized gains in decentralized tokens such as Chainalysis have driven investors to speculate about DeFi tokens.

Kim Grauer (head of Chainalysis research), stated in an email that the “increase in DeFi-related crimes is an example how criminals often exploit technology.”

DeFi’s growth this year saw a large increase in DeFi protocol usage to launder money and DeFi protocols becoming the victims of hacking.