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CipherTrace report shows a decline in illicit activity in the crypto ecosystem

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In extreme market conditions June 13 report CipherTrace describes in detail the positive changes in the crypto ecosystem, suggesting a decrease in the number of crypto-related crimes.

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The report shows an increase in cryptocurrency trading from $4.3 trillion in 2020 to $16 trillion in 2021. The firm claims that this exponential growth is the reason regulators are scrutinizing the cryptocurrency ecosystem.

Decrease in crypto crime

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According to CipherTrace, illegal activity has declined and now makes up a small part of the entire crypto ecosystem. The firm estimates that illegal activity, which accounted for between 0.62% and 0.65% of total cryptocurrency activity in 2020, has dropped to 0.10 in 2021.

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CipherTrace estimates that hackers made $2.4 billion from analyzing the top ten DeFi hacks in 2021 and the first quarter of 2022. The Ronin Network exploit in March 2022 and the Poly Network hack in 2021 account for almost half of the total.

While this amount is significant, the firm clarifies that the rapidly expanding ecosystem is a small fraction of the total market value.

CipherTrace infographic on cryptocrime and anti-money laundering

The report indicates that the cryptocurrency market grew by 1456% between 2019 and March 31, 2022. The market peaked at $3 trillion in November 2021 after several cryptocurrencies surged.

The firm also said that much of the illegal activity has moved to DeFiNFT and next generation mixing services.

He stated that the figures used in the report do not reflect the actual cost of illegal activities. It states: “Please note, the fact remains that not all illegal activity is known, whether in traditional financial channels, in cryptocurrencies, or in other informal transfers of value. So, take whatever numbers you see, from us or others, with that perspective in mind.”

Regulators sink deep

Regulators have long expressed concern that people are using the cryptocurrency market as a safe haven for illegal activity. Thus, the observed significant growth has led to increased regulatory measures from governments to keep up.

The report cites President Biden’s March executive order to explore blockchain technology, the creation of a virtual asset regulator in Dubai, and the European Union’s proposed anti-money laundering laws as examples of such regulatory efforts.

CipherTrace also added that much of the regulatory effort will focus on reducing threats to the crypto ecosystem. This means that crypto-currency organizations will be subject to increased scrutiny from regulators.

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