Hacking, however, remains on the rise, as $1.9 billion worth of cryptocurrency has been stolen in hacks this year, compared to under $1.2 billion at the same point in 2021.
After cryptocurrency-based crime hit an all-time high in 2021, with illicit addresses receiving $14 billion over the year, there appears to be a slowdown in illicit crypto-related activities, aligning with the broader decline of cryptocurrency markets. However, while legitimate cryptocurrency transaction volumes have dropped 36 per cent year-over-year, criminal activity appears to be more resilient, with comparative illicit volumes down just 15 per cent.
The total cryptocurrency-related scam revenue for 2022 currently sits at $1.6 billion, 65 per cent lower than it was through July 2021. This decline appears linked to declining prices across different currencies. Moreover, it’s not just scam revenue falling — the cumulative number of individual transfers to scams so far in 2022 is the lowest in the past four years. And while the biggest scam of 2022 has netted $273 million worth of cryptocurrency, this represents just 24 per cent of the revenue that the largest scam of 2021 drew in at the end of July last year.
“Our data suggest that fewer people than ever fall for cryptocurrency scams. One reason could be that with asset prices falling, cryptocurrency scams — which typically present themselves as passive crypto investing opportunities with enormous promised returns — are less enticing to potential victims. We also hypothesise that new, inexperienced users who are more likely to fall for scams are less prevalent in the market now that prices are declining, as opposed to when prices are rising and they’re drawn in by hype and the promise of quick returns,” said Kim Grauer, Director of Research at Chainalysis.
Darknets — the infamous hubs that facilitate the sales of drugs, hacking tools, stolen data, and money laundering services — have also been impacted, with revenues for these marketplaces currently 43 per cent lower than darknet market revenues through July 2021. Grauer states that this decline demonstrates the tangible impact of law enforcement’s growing ability to fight cryptocurrency-based crime.
While the decline in illicit activity bodes positively for the crypto community, there remain concerns around specific threats, most notably hacking and stolen funds. Through July 2022, $1.9 billion worth of cryptocurrency has been stolen in hacks of services, compared to just under $1.2 billion at the same point in 2021. Much of this can be attributed to the meteoric rise in funds stolen from DeFi protocols, particularly cross-chain bridges. Furthermore, much of the value stolen from DeFi protocols can be attributed to bad actors affiliated with North Korea, especially elite hacking units like Lazarus Group. Chainalysis estimates that in 2022, North Korea-affiliated groups have stolen approximately $1 billion of cryptocurrency from DeFi protocols.
“We shouldn’t expect theft to drop, based on cryptocurrency market movements, the way scamming does. So long as crypto assets held in DeFi protocol pools and other services have value and are vulnerable, bad actors will try to steal them,” said Grauer. “The only way to stop crypto hackers is for the industry to shore up security and educate employees to recognise red flags and consumers on finding safe projects to invest in. Law enforcement, meanwhile, must continue developing their ability to seize stolen cryptocurrency to the point that hacks are no longer worthwhile.”
