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2019 Saw More Illicit Crypto Transactions than 2018: Chainalysis Report

Another year has passed in the realm of blockchain and cryptocurrency and, according to annual reports from third parties, there are a lot of important insights to be derived from analysing 2019s year-end metrics.

Not only pertaining to market performance (i.e. token values, market caps, etc); but also to the magnitude and frequency of the exploitation of security failures – particularly those enacted against cryptocurrency exchanges.

One of these reports comes from Chainalysis, which describes itself as  “the blockchain analysis company… [comprised of] experts in financial crime and blockchain analysis”.

Chainalysis additionally claims to provide “compliance and investigation software to the world’s leading banks, businesses and governments”. According to its official website: key investors in Chainalysis include Accel, Benchmark, Mitsubishi UFJ Financial Group, Inc / MUFG, and Sozo Ventures.

2019 saw a much greater volume of cryptocurrency related crimes than both 2018 and 2017. This has been calculated based on the market share of crypto funds being received or sent illicitly.

Chainalysis determined that the responsibility for crypto-related consumer protection, regarding scams in particular, should be placed on governments as well as custodial exchanges.

This is in comparison against five other subcategories: money laundering, ransomware, hacks, darknet markets, and terrorism financing. From observation and anaysis of these subcategories, Chainalysis identified Money Laundering as the “key to crypto crime” as:

“because every criminal earning cryptocurrency illegally eventually needs to obscure the origins of their holdings in order to convert them to cash… here are sophisticated services and networks designed to do just that”

Chainalysis states the proportion of illicit transactions made through Bitcoin on exchanges grew “steadily” since the beginning of the 2019.

Out of a total of $2.8 billion bitcoin traded in crime-related circumstances, the report identifies that “Just over 50% went to the top two [exchanges]: Binance [27.5%] and Huobi [24.7%]” – and all other exchanges = 47.8% of total share.

Despite this, only a minority of the accounts held with these exchange platforms received bitcoin from criminal sources in 2019, whilst small segments of these involved accounts have been identified as “extremely active”.

“The 2,196 accounts in the three highest-receiving buckets received a total of nearly $27.8 billion worth of Bitcoin in 2019.”

According to the report, scams became the dominant form of cryptocurrency crimes to occur in 2019 by a significant margin – earning their operators more capital than any other subcategory.

Furthermore, the greatest volume of funds were sent from victims (usually hopeful investors) to the operators of so-called ‘Ponzi Schemes’ – which “accounted for 92% of the bottomline total”.

Other categories tracked include: “Reported investment scam, Phishing, Other scam, Fake token sale, Blackmail, Fake mixer”.