Cryptocurrency-related crime dropped to a tiny fraction of the total trading volume last year. But some targeted hacks boomed as criminals exploited people working from home during the pandemic.
Last year, illegal activity constituted 0.34% of the total cryptocurrency transaction volume, according to a report by blockchain data company Chainalysis. That was less than about 2% a year earlier.
“We saw a significant decline in the share of total activity related to illegal entities,” Kim Grauer, Chainalysis’s chief of research, told CNBC. “Still, ransomware was by far the largest category in terms of activity growth and we’re seeing record highs for darknet market activity.”
Ransomware is malicious software that hackers use to infect a computer and then charge a fee to unlock it. That premium is often paid in bitcoin or other cryptocurrencies.
The category made up only 7% of all crypto funds received by criminals, but rose 311% year over year. Chainalysis pointed to more people working from home as a new vulnerability for businesses – and an opportunity for criminals.
Darknet markets were the second largest crime category, accounting for $ 1.7 billion in cryptocurrency activity – up about 30% from a year earlier. The dark net, also known as the dark web, is a network that uses the Internet, but requires specific software and authorizations to access it.
Chainalysis crypto-crime report
Chain analysis
Source: Chainalysis
Criminals have turned to cryptocurrencies such as bitcoin because they can easily send instant online.
Cryptocurrencies are also pseudonyms. You can see where the money has been sent so companies like Chainalysis can easily track it. But you cannot see who sent them.
Those features have caught the attention of regulators who fear the potential role of crypto in money laundering and terrorist financing.
Janet Yellen, the nominee for President Biden’s Treasury Secretary, mentioned the potential for abuse in her confirmation hearing this week, which weighed bitcoin prices according to analysts. The US government must “look carefully at how to encourage its use for legitimate activities,” while “restricting its use for malicious and illegal activities,” Yellen said.
Scams still made up more than half of all cryptocurrency-related crimes, but dropped significantly from year to year.
Chainlysis’ Grauer said this was due to increased awareness of events such as the PlusToken Ponzi scheme, which cost more than $ 2 billion in victims in 2018.
“People learned a little bit two years ago to follow the ‘get rich quick’ mindset,” said Grauer. “That may have made people understand some of these really big Ponzi schemes.”
Bitcoin has taken off as a mainstream investment in Wall Street in recent months. The world’s largest cryptocurrency reached $ 40,000 in early January, spurred by interest from institutions and private investors, who can now purchase bitcoin through payment companies such as PayPal.
The cryptocurrency fell below $ 30,000 on Thursday.