As more and more people become interested in the world of cryptocurrencies and more and more cryptocurrency tokens are traded, cryptocurrency crime is also increasing. Criminals can be found all over the crypto world these days, looking for new ways to rob people of their assets.
The world of cryptocurrencies is changing rapidly, as is crypto-related crime. New trends are visible every year. This may involve entirely new forms of crime, but also old forms in a new guise. In this blog, you can read all about the latest crypto crime trends, so you can be more vigilant and avoid falling victim to it.
The video below looks at the top 5 crypto scams in 2022. Here’s how you know which scam techniques are popular this year and how scammers work with them:
crypto crime figures
Crypto offers an alternative to the traditional financial sector through a decentralized system, which is independent from banks and the government. Transactions can be carried out quickly over a network and are difficult to trace back to individuals. In addition to the many advantages, this approach also carries risks. Therefore, there are warnings from various sectors about the dangers of the crypto market and more supervision is requested. Cryptocurrencies are vulnerable to various forms of crime; because criminals have also found the crypto market. Especially the growing popularity in connection with the anonymous and cross-border nature of cryptocurrencies offers opportunities for criminals.
In 2021, cryptocurrency-related crime hit a new high, according to research by cryptocurrency analytics firm Chainalysis. A total of $14 billion was received in illegal transactionsCompared to $7.8 billion in 2020, $11.7 billion in 2019, and $4.4 billion and $4.6 billion in 2018 and 2017, respectively, these involved different types of illegal transactions, as shown in the chart below:
However, these numbers do not tell the whole story. Crypto usage is growing faster than there are more and more people buying and selling cryptocurrencies. Research shows that the total crypto trading volume has grown to $15.8 trillion by 2021. This is an increase of around 567% compared to the total trading volume in 2020. Given this growth, it is not surprising that every More and more criminals are also using cryptocurrencies to commit crimes.
In proportion it is however, the percentage of illegal crypto transactions decreased looking at previous years. In 2021, the percentage of illegal crypto transactions was “only” 0.15% of the total trading volume. In 2020 it was 0.62%, in 2019 even 3.37% and in 2018 and 2017 the percentage was 0.76% and 1.42%. The share of illegal transactions in the total crypto trading volume has never been lower than it is now. Therefore, the conclusion is that the legal use of cryptocurrencies has increased.
Therefore, crime seems to be taking a smaller and smaller place within the crypto ecosystem. On the one hand, this can be explained by the fact that a growing public is taking cryptocurrencies more seriously as a digital investment or payment tool. For example, Ipsos research shows that around 1.2 million Dutch people owned cryptocurrencies in 2021. On the other hand, cryptocurrencies have also gained more attention from governments, regulators, and enforcers. Therefore, the ability of law enforcement to fight cryptocurrency-based crime is also evolving.
Of course, even though the percentage of illegal transactions is declining, $14 billion of illegal activity is still a lot of money and therefore problematic. The criminal misuse of cryptocurrencies creates huge barriers to further development and integrations, increases the likelihood of severe government restrictions, and worst of all, innocent people fall victim and lose a lot of money.
Therefore, it is good to consider crypto crime trends, so that you can at least be alert to this.
trending crypto crime
What trends are visible in cryptocrime? The following table shows the percentages of the different types of crimes in recent years. If you look at these percentages, two categories have increased a lot in terms of percentage in 2021: cryptocurrency theft and, to a lesser extent, scams.
DeFi plays a major role in both cryptocurrency theft and scams. What is DeFi? Decentralized finance, abbreviated as DeFi, literally means decentralized finance. DeFi is a development that allows financial instruments and services to be provided, without depending on an intermediary such as a bank. This is done through smart contracts on the blockchain, which process financial transactions without intermediaries.
income from scams jumped 82% to $7.8 billion in crypto stolen from victims in 2021. More than 2,800 million of this amount were obtained by pulls back† Carpet thefts are a fairly new type of scam, where scammers pretend it’s a trustworthy project and then take all the money from the project. This goes beyond simple cryptocurrency theft, it really needs to involve deception and gain the trust of investors. In many cases, these involved DeFi projects, where fraudsters tricked investors into buying tokens associated with a particular project and then ran off with investors’ money. The tokens are worth nothing after that.
A well-known example of a backward jerk is the Squid game rug run, which took place in November 2021. Squid Game (SQUID) was a project based on the hit Netflix series and was supposed to be a game to win on Binance Smart Chain, according to the whitepaper, but the game never came out. after tab after a rapid increase of 7400% It reached a value of $2.86, the creators withdrew the money, and the token plummeted to close to $0. Investors were left empty-handed. It is estimated that the scammers made between 3 and $12 million loot.
Pullbacks are common within DeFi for various reasons. First, it is due to the hype surrounding DeFi. The trading volume of DeFi projects increased by 912% in 2021. The high yield of decentralized tokens has made many eager to invest in DeFi tokens. At the same time, it is not very complicated to create new DeFi tokens and place them on exchanges, even without a code audit. A code audit is a process by which an external company or exchange verifies the code of the smart contract analysis behind a new token or other DeFi project. The third-party company then publicly confirms that the contract rules are trustworthy and therefore do not contain a mechanism for developers to keep investors’ cryptocurrencies. Therefore, you can avoid becoming a victim of pushback by only investing in projects that have undergone a code audit.
Cryptocurrency theft grew even more than scams. In 2021, around $3.2 billion worth of cryptocurrency was stolen; this is an increase of around 516% compared to 2020. About $2.2 billion of that, 72% of the 2021 total, was stolen from DeFi protocols. DeFi theft can be attributed to bugs in smart contracts, making it possible for hackers to steal crypto. This rise in DeFi-related theft is related to the trend of DeFi playing a significant role in crypto crime.
In 2020, just under $162 million worth of crypto was stolen from DeFi platforms. That was 31% of the total amount of crypto stolen for the year. That alone represented a 335% increase compared to 2019. In 2021, that percentage increased by another 1,330%. In other words: As DeFi has continued to grow, so has the problem of cryptocurrency theft within Defi.
There is also a visible growth in the use of DeFi for money laundering. In 2021, an increase of approximately 1964% was seen. That’s not very surprising either. Criminals who scam people and steal cryptocurrencies have an ultimate goal: to hide this stolen cryptocurrency from the authorities and convert it into legal money, so that it can be spent without proving its illegal origin. Thus, money laundering is the foundation of all forms of crypto crime, but because DeFi has increased in popularity tremendously and offers many possibilities, criminals see many opportunities there as well.
NFTs were one of the biggest hype in 2021. As is the case with any new form of technology, NFTs present many opportunities for abuse. On the one hand, NFTs are used as a means of crypto theft or scam. Common NFT scams include fake NFT projects, NFT knockoffs, or NFT hacks.
On the other hand, NFTs are also bought with illegally obtained cryptocurrencies. As with physical art, NFTs can easily be used for money laundering. As can be seen in the graph below, the value of illegally acquired cryptocurrencies sent to the NFT markets increased significantly in 2021:
|Want to know more about the different forms of cryptocurrency theft and scams and how you can protect yourself against them? Then read this blog, in which 10 practical tips are given to avoid being scammed with cryptocurrencies†|
The use of crypto is growing faster than ever and therefore more and more people are trading crypto. Due to this growth, crypto crime is also on the rise. We can clearly see that DeFi plays a big role in this. DeFi offers huge opportunities for companies and investors, but it also offers opportunities for criminals and new forms of crime. So be careful and don’t invest in projects without first doing a good research on the reliability and intentions behind the project!
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