According to a study by blockchain analytics firm Chainalysis, money laundering using cryptocurrencies surged again in 2021. Compared to the previous year, money laundering increased by a whopping 30 percent, but still falls far short of the levels seen before the COVID-19 pandemic began.
Money laundering with cryptocurrencies worth around US$8.6 billion
According to Chainalysis, nearly $8.6 billion worth of money had been laundered from cryptocurrencies in 2021, a 30 percent increase compared to 2020. In 2019, the previous high was reached, where money laundering came to $10.9 billion.
However, Chainalysis’ analysis is based only on so-called “cryptocurrency” money laundering in the form of drug trafficking on the darknet and extortion with ransomware. Stolen real money that was then laundered using cryptocurrencies is extremely difficult to track and is not currently part of the investigation, the report says. Theft and fraud, in particular, are the most popular forms of crypto money laundering, it said.
As the Europol reports, money laundering of stolen money is also increasing noticeably, though the European police do not give figures on this.
DeFi – Decentralised Finance is being used
Addresses associated with theft send about half of the stolen funds, and thus cryptocurrencies worth more than $750 million, to DeFi platforms, according to the report.
That stands for Decentralised Finance and includes new financial service providers that rely on blockchain technology and smart contracts for the backend. This allows traditional banking to be left out of the equation. Loans, derivatives and cryptocurrency trading are among the core areas of DeFi providers. Especially among hackers from North Korea, DeFi protocols are extremely popular for money laundering, he said.
Cryptocurrency exchanges popular with fraudsters
Unlike theft, fraudsters primarily send the money to addresses at centralized cryptocurrency exchanges. Chainalysis suspects that this could be due to the lower technical understanding of the criminals, who would not be able to cope with DeFi. As a result, they would resort to less sophisticated techniques for laundering money.
Overall, about 47 percent of the money from cryptocurrency money laundering went to such exchanges. 17 percent went to DeFi services. In the previous year, only two percent went to DeFi providers.
Payments to mixing services also increased significantly. Overall, money laundering activity is concentrated in a very limited number of services and providers and is therefore relatively easy to keep track of. However, the sum of money laundering only amounts to a share of 0.05 percent of all transactions with cryptocurrencies.