As many crypto companies struggled amid a widespread market downturn in 2022, illicit actors in the industry had their best year yet, according to a report by Chainanalysis.
The blockchain data platform said in a report on Thursday that even during 2022’s prolonged Crypto Winter, a record $20.1 billion was collected by illicit addresses—the second straight year such transaction volume increased.
“The events of this year have made clear that although blockchains are inherently transparent, the industry has room for improvement,” Chainanalysis wrote.
By studying on-chain data, the firm found that 44% of the illicit transactions were related to sanctioned platforms. This includes Russia-tied crypto exchange Garantex, which the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned last year for facilitating more than $100 million in illicit transactions.
While year-over-year transaction volumes associated with terrorism financing, darknet markets, and scams decreased, stolen funds still increased 7% compared with 2021.
Chainalysis stressed in its report that its count of illicit transactions—less than 1% of all crypto transactions—is a conservative estimate. It doesn’t include non-crypto native crime, like drug deals that use crypto for payments, and it doesn’t include money tied up in the bankruptcy cases of Celsius, Three Arrows Capital, and FTX, all of which imploded last year, some of which have been accused of crimes.
“For the time being, we’ll leave questions of criminality to the legal system,” Chainanalysis wrote, explaining why in some cases funds weren’t included in its findings.
The data firm said that the dollar amount tied to illicit transactions may still increase as new data is discovered—the previous year’s initial total of about $14 billion, for example, has since been revised upward to $18 billion.
To increase security, the firm said crypto companies should strive to connect off-chain data on liabilities with on-chain data for more outward visibility.
“Last year was one of the most tumultuous in cryptocurrency history,” Chainanalysis said.
