Chainalysis has released the most recent crypto crime report. It shows that illegal cryptocurrency activity reached an all-time high of $14 billion in value during 2021. That’s up from $7.8 billion in 2020 – marking a significant 66% increase.

While the amount of criminal activity was a fraction of a percent of the total legitimate trading volume, we can’t ignore the fact that $14 billion worth of illicit activity represents a significant problem. The criminal abuse of cryptocurrency can create huge obstacles to continued adoption and increase the possibility of tighter regulation by governments. It also leads to victimization of innocent persons around the world.

DeFi represents a huge opportunity for both entrepreneurs and digital asset users. It is also one of the most rapidly growing segments within the larger crypto ecosystem. However, it’s unlikely for DeFi to reach its full potential if the same decentralization features that make it so dynamic also enable widespread theft.

Just under $162million worth of cryptocurrency was taken from DeFi platforms in 2020. This represented an increase of 335% over what DeFi platforms had stolen in 2019. In 2021 however, this number jumped by 1,330%. DeFi’s thuggish theft problem has also grown.

Chainalysis also found a substantial increase in money laundering using DeFi protocols. This illegal practice of DeFi protocol money laundering was only detected in 2020. Last year, however, DeFi money laundering soared 1,964%.

These negative points aside, the research revealed one positive: law enforcement is able to more easily seize illegally acquired cryptocurrency. For example, in November 2021, the IRS Criminal Investigations unit seized more than $3.5 billion worth of cryptocurrency — representing 93% of all funds seized by the division for the year. Similar recoveries included $56 million seized by the Department of Justice from a crypto scam, $2.3 million captured from the ransomware group behind the Colonial Pipeline attack, and an undisclosed amount seized by Israel’s National Bureau for Counter Terror Financing. It is encouraging progress, but there’s still much more work to do.

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