Sanctions fuel record-high crypto amounts passing through illicit wallets in 2022

Illicit cryptocurrency activity hit an all-time high of $20.3 billion in 2022, according to initial estimates from blockchain analysis firm Chainalysis.

By the numbers: The new record high is mostly due to the growing number of crypto-related entities that the U.S. government sanctioned in 2022, per the report.

• Transactions involving sanctioned entities, such as crypto exchange Garantex and crypto mixer Tornado Cash, accounted for 44% of illicit transaction activity.
• However, while transactions tied to sanctioned entities skyrocketed between 2021 and 2022, transaction volumes fell across nearly all other categories of illicit activity that Chainalysis measures, including ransomware and darknet marketplaces.
• But that downward trend is normal in a falling market, the report notes.

The big picture: Cybercriminals often lean on pseudo-anonymous cryptocurrencies because of their reputation for being harder to trace and their relative freedom from reporting regulations compared to fiat currencies.

• For example, ransomware gangs often demand ransoms be paid using bitcoin.

Between the lines: This year’s $20.3 billion record accounts for only 0.24% of all cryptocurrency activity — double last year’s 0.12% share but still a minuscule percentage of all transactions.

Yes, but: Researchers said the 2022 total is likely to change throughout the year as they identify new wallet addresses tied to illicit activity.

• For 2021, Chainalysis originally found $14 billion worth of crypto tied to illicit activities — $4 billion less than the revised figure.

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