Illicit cryptocurrency transactions increased tenfold in 2022, marking the highest total figure yet in the history of crypto. In what was arguably the worst year for bitcoin and its crypto cousins to date, close to $20 billion in illicit crypto was transferred to suspicious addresses.
Illicit Crypto Activity Reached a Pinnacle Last Year
This beats the previous record set in 2021, which was $18 billion. The new number outdoes the previous one by roughly $2 billion. Kim Grauer – director of research at crypto analysis firm Chainalysis – said in a statement:
While concerning, this rise can be explained by the fact that due to the bear market, there was a drop in overall transaction volume, while illicit transaction volumes declined at a slower rate.
Among the many problems faced in 2022 amongst crypto fans (dying prices, bankruptcies, etc.), the largest one was arguably the collapse of crypto exchange FTX, which only took three years to rise to prominence. The fact that such an event could occur sent several people’s minds flailing out of control, and trust for centralized exchanges began to diminish after it was unveiled that Sam Bankman-Fried – the founder and head executive of the company – would face trial after being arrested in the Bahamas.
It is alleged, at the time of writing, that SBF used customer funds to invest in luxury Bahamian real estate. He is also believed to have used said money to pay off loans for his other company Alameda Research. Grauer further commented with:
While crypto is already more transparent than traditional finance, these collapses demonstrate there are opportunities to connect off-chain data on liabilities with on-chain data to provide better visibility.
The space has also been marred by massive layoffs as many companies can no longer deal with the ongoing bearish conditions they’re facing. At this time, several crypto exchanges – including Coinbase and Huobi Global – have announced plans to part ways with several staff members.
Jehanzeb Awan – chairman of the Middle East, Africa, and Asia Blockchain Association – explained:
It is pivotal for the industry to help the investing public understand the opportunity and corresponding risks that come with investing in cryptocurrencies. The importance of holistic regulation to minimize regulatory arbitrage is key to reducing the impact of the recent events as well as bringing confidence back to the industry.
Roughly 44 percent (just under half) of the recorded illicit crypto transactions to occur in 2022 took place via sanctioned entities. The rest were more assorted and stemmed from private theft, scams, and darknet activity (i.e., selling guns, drugs, and other illegal materials for crypto).
Transparency Is Key
Grauer concluded with:
The level of transparency that is inherent to defi is what all crypto services should strive towards. As more value moves on-chain, transparency will increase, and systemic risks will be easier to identify.
Source: Read Full Article