- Crypto crime was down in the first half of 2022, according to Chainalysis
- Hacks and thefts remained up, but most other types of illegal activities were lower than H1 2021
- Hacks and thefts were the only area to increase in the first half of 2022
Illicit crypto activities fell in the first half of the year according to Chainlaysis, mainly due to a lack of novices in the space and falling asset prices. The Chainalysis Mid-year Crypto Crime Update, published yesterday, showed that illicit and legitimate entities are so far less than the same period in 2021, although there are specific areas, such as hacks and thefts, where revenue is up compared to last year.
Illicit Volume 65% Down on H1 2021
Chainalysis reports that illicit volumes are down just 15% year over year, compared to 36% for legitimate volumes, with $1.6 billion taken by scammers, 65% down on last year. Chainalysis finds that scam intake has more or less followed the Bitcoin price since 2021:
The number of monthly transfers to known scams is also massively down on previous years, around one million compared to some 11 million in 2020. Chainalysis puts this down to falling asset prices which make cryptocurrency scams “less enticing to potential victims”. They also suggest that newer, more vulnerable traders have been washed out of the market, leaving a smaller pool in which to operate.
Interestingly, darknet activity, which doesn’t typically follow market trends, is sitting 43% lower than last year. However, as Chainalysis points out, this probably wouldn’t have happened had Hydra not been taken offline in April, which resulted in a huge dropoff. Despite this, individual transactions to darknet markets increased over last year, presumably as users tried other markets.
Thefts and Hacks Up
The area where illegal activity is rampant is with crypto thefts and hacks. This won’t be a surprise to anyone who has kept an eye on the crypto news this year, but Chainalysis’ research confirms it – hacks are big business.
Headline-grabbing thefts such as the $540 million Ronin attack carried out by Lazarus have been augmented by many smaller hacks, but Chainalysis does highlight the work of Lazarus in its report, estimating that so far in 2022, North Korea-affiliated groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols.
Chainalysis warns that DeFi protocols are “uniquely vulnerable to hacking” thanks to their open source code which can be “studied ad nauseum by cybercriminals looking for exploits”, and adding that the race to be first has led to gaps in security best practices.
Overall, while it is good news that crypto crime is down, much of this seems to be to do with the onset of the bear market rather than any improvement in the crypto space to protect against it. Were the market to turn around tomorrow we could expect many of these stats to dramatically increase, and it’s clear that the main area needing work is with DeFi protocols, which are starting to have a moral obligation to get their shit together.