Crypto crime reached an all-time high in 2022 exceeding $20 billion, according to the latest report by Chainanalysis. Since 2020, illicit transaction volume has jumped by over 100%, growing for the second year in a row. However, this wouldn't be the case if it weren't for geopolitics. As much as 44% (an over 100,000-fold increase year-on-year) of illegal crypto transactions fall into the "sanctions" category covering activity of the entities targeted by the U.S. Department of the Treasury and its equivalents in other countries.
The report quotes the Garantex exchange as one of the biggest organizations engaged in illegal crypto trade. Authors remark that any dealings with sanctioned companies entail critical compliance risk for businesses operating within U.S. jurisdiction, which may extend to fines and criminal charges.
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Surprisingly, transaction volumes dwindled across all the other categories of crypto crime except "stolen funds" (a 7% rise). The most convincing explanation for this trend is the market decline. The report's authors observe that scams are less likely to succeed in bearish times as users get pessimistic and distrustful or unable to scrape money for investment.
It's important to note that Chainanalysis' estimates include only blockchain-recorded transactions and do not cover crime involving off-chain activity, such as crooked accounting by crypto companies. Moreover, Chainanalysis has a very limited ability to discern between legal or illegal use of crypto for payment. For example, it cannot link a transaction to drug trafficking.
Referring to the $20.1 billion number put forth in the report, the authors note that "this is a lower bound estimate" since their "measure of illicit transaction volume is sure to grow over time" as they "identify new addresses associated with illicit activity." In last year's report, they estimated illicit activity in 2021 at $14 billion and later raised that figure to $18 billion, "mostly due to the discovery of new crypto scams."
