As more and more people become interested in the crypto world and more and more cryptocurrencies are traded, crime with crypto is also increasing. Criminals can be found all over the crypto world these days, looking for new ways to deprive people of their assets.
The crypto world is changing fast, and so is cryptocurrency. New trends are visible every year. It can be about completely new forms of crime, but also old forms in a new disguise. In this blog you can read all about the latest trends in cryptocurrency so you can be extra vigilant and avoid falling victim to this.
The video below discusses a top 5 crypto scams in 2022. How to know which scam techniques are popular this year and how scammers work with them:
Crypto offers an alternative to the traditional financial sector through a decentralized system that is independent of banks and government. Transactions can be performed quickly in one network and are difficult to trace back to individuals. In addition to the many benefits, this approach also involves risks. There are therefore warnings from various angles about the dangers of the crypto market, and more supervision is called for. Cryptocurrencies are vulnerable to various forms of crime; because criminals have also found the crypto market. In particular, the growing popularity associated with the anonymous and cross-border nature of crypto provides opportunities for criminals.
In 2021, crypto-related crime hit a new record, according to research from the cryptanalysis firm Chainalysis. In total, $ 14 billion was received in illegal transactionscompared to $ 7.8 billion in 2020, $ 11.7 billion in 2019, and $ 4.4 and 4.6 billion in 2018 and 2017, respectively. These involved various types of illegal transactions, as shown in the chart below:
However, these numbers do not tell the whole story. The use of crypto is growing faster than always and then there are more and more people buying and selling crypto. Research shows that the total trading volume of crypto has grown to $ 15.8 trillion in 2021. This is an increase of about 567% over the total trading volume in 2020. With this growth, it is no surprise that more and more criminals are also uses crypto to commit crime.
In relationship is however, the percentage of illegal crypto transactions decreased when looking at previous years. In 2021, the percentage of illegal cryptocurrencies was ‘only’ 0.15% of 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 trading volume of crypto has never been lower than now. The conclusion is therefore that the legal use of crypto has increased.
Crime thus seems to occupy a smaller and smaller place in the cryptoecosystem. On the one hand, this can be explained by the fact that crypto is being taken more seriously by a growing public as a digital payment or investment tool. For example, research from Ipsos shows that around 1.2 million Dutch people owned crypto in 2021. On the other hand, crypto has also received more attention from governments, regulators and enforcers. Thus, law enforcement agencies’ ability to combat crypto-based crime is also evolving.
Despite the fact that the percentage of illegal transactions is falling, $ 14 billion in illegal activity is still a lot of money and is therefore problematic. Criminal use of crypto creates huge barriers to further development and integrations, increases the likelihood of serious government restrictions, and worst of all, innocent people fall victim to it and lose a lot of money.
It is therefore good to consider the cryptocurrency trends so that you can at least be aware of this.
Trends in cryptocurrency
What trends are visible in cryptocurrency? The table below shows the percentage of different types of crime in recent years. If we look at these percentages, two categories have increased a lot in percentage in 2021: crypto-theft and, to a lesser extent, fraud.
DeFi plays a major role in both crypto-theft and fraud. What is DeFi? Decentralized economy, abbreviated to DeFi, literally means decentralized economy. DeFi is a development that makes it possible to provide financial instruments and services, without being dependent on an intermediary such as a bank. This is done through smart contracts on the blockchain, which process financial transactions without intermediaries.
The income from fraud rose 82% to $ 7.8 billion in stolen crypto from victims in 2021. More than 2.8 billion of this amount was obtained by pulling back† Rug pulls are a fairly new type of scam where scammers pretend it is a credible project and then take all the money out of the project. This goes beyond just stealing crypto, it must really involve deception and win 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 the investors’ money. The tokens are worth nothing after that.
A well-known example of a back pull is Squid game carpet draw, which took place in November 2021. Squid Game (SQUID) was a project based on the popular Netflix series and, according to the white paper, was supposed to be a play-to-earn game on Binance Smart Chain, but the game never came out. After token after a rapid increase of 7400% Reaching a value of $ 2.86, the creators withdrew the money, and the token plunged to close to $ 0. Investors stood empty-handed. It is estimated that the scammers made between 3 and $ 12 million exchange.
Back pulls are common in DeFi for several reasons. First, it’s because of the hype surrounding DeFi. Trading volume for DeFi projects increased by 912% in 2021. The high return on decentralized tokens has made many eager to invest in DeFi tokens. At the same time, creating new DeFi tokens and placing them on exchanges is not very complicated, even without a code audit. A code revision is a process by which an external company or stock exchange checks the code for smart contract analyzes behind a new token or other DeFi project. The third party company then publicly confirms that the rules in the contract are credible and thus do not contain a mechanism for the developers to get rid of the investors’ crypto. Therefore, you can avoid falling victim to a withdrawal by investing only in projects that have undergone a code revision.
Crypto-theft grew even more than fraud. About $ 3.2 billion in crypto was stolen in 2021; that is an increase of about 516% compared to 2020. About 2.2 billion of that, 72% of the total number in 2021, was stolen from DeFi protocols. DeFi theft can be traced to errors in the smart contracts, allowing hackers to steal crypto. This increase in DeFi-related theft is related to the trend where DeFi is seen to play a major role in cryptocurrency.
In 2020, nearly $ 162 million worth of crypto was stolen from DeFi platforms. That was 31% of the year’s total cryptocurrency stolen. That alone accounted for an increase of 335% over 2019. In 2021, that percentage increased by a further 1330%. In other words: as DeFi has continued to grow, so has the problem of cryptocurrency theft in Defi.
There is also a visible growth in the use of DeFi for money laundering. In 2021, there was an increase of about 1964% visible. It’s not very surprising either. Criminals who cheat people and steal crypto ultimately have one goal: to hide this stolen crypto from the authorities and convert it into legal money so that it can be used without proving its illegal origin. Money laundering is therefore the basis of all forms of crime with crypto, but because the popularity of DeFi has increased enormously and offers many opportunities, criminals also see many opportunities there.
NFTs were one of the biggest hypes in 2021. As with any new type of technology, NFTs offer many opportunities for abuse. On the one hand, NFTs are used as a means of crypto-theft or fraud. Common NFT scams include fake NFT projects, copycat NFTs, or NFT hacks.
On the other hand, NFTs are also purchased with crypto obtained illegally. As with physical art, NFTs can be easily used for money laundering. As can be seen in the chart below, the value of illegally acquired crypto sent to NFT marketplaces increased significantly in 2021:
|Want to know more about the different types of crypto theft and scams and how you can protect yourself from them? So read this blog in which 10 practical tips are given to avoid being cheated with crypto†|
The use of crypto is growing faster than ever, and therefore more and more people are trading in crypto. Because of this growth, cryptocurrency crime is also on the rise. We can clearly see that DeFi plays an important role in this. DeFi provides enormous opportunities for companies and investors, but also provides opportunities for criminals and new forms of crime. So be warned and do not invest in projects without first doing good research into the reliability and intentions behind the project!
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