Crypto money laundering to grow by a third in 2021, but still below peak

A new report from Chainalysis reveals that $8.6 billion will be laundered in cryptocurrencies in 2021. This marks a 25% increase over 2020, but is still well below 2019's high levels.

In 2019, $10.9 billion was laundered in cryptocurrencies. Chainalysis estimates that since 2017, cryptocurrency money laundering has totaled $33.4 billion.

Chainalysis noted that the $33.4 billion laundered in cryptocurrencies since 2017 pales in comparison to the estimated $2 trillion laundered in fiat currencies annually for offline crimes such as drug trafficking. However, due to the use of untraceable cash in offline crimes, reliable assessments of laundered amounts in fiat currencies are more difficult to determine than in cryptocurrencies. The report states:

"The biggest difference between fiat and cryptocurrency-based money laundering is that, thanks to the inherent transparency of blockchain, we can more easily track how criminals move cryptocurrencies between wallets and services, converting their funds into cash .”

According to the cybersecurity analytics provider, the laundered cryptocurrency value comes from "crypto-native crimes" in which "profits are almost always earned in cryptocurrency rather than fiat."

For the first time since 2018, centralized exchanges (CEXs) accounted for less than half (47%) of money laundered by value, suggesting a possible change in the behavior of cybercriminals. The share of DeFi protocols used for illegal addresses increased from 2% in 2020 to 17% in 2021, an increase of nearly 2000%.

Hackers, who stole roughly $400 million, strongly leaned toward DeFi, while scammers leaned toward CEX, which Chainalysis attributes to a “relative lack of maturity.”

“Mining pools, high-stakes exchanges, and mixing platforms also saw significant value growth from illicit addresses,” Chainalysis said.

The top five money laundering services accounted for more money laundered funds in 2021 (58%) than in 2020 (54%). However, the overall concentration of money laundering decreased in 2021, as 583 addresses received deposits worth at least $1 million in 2021, while in 2020, 270 such addresses were used.

By asset, altcoins had the highest concentration, with 68% laundered into the 20 largest deposit addresses used for illicit activities. Ethereum followed with 63%, stablecoins 57%, and Bitcoin had by far the lowest concentration of money laundering, with only 19% going to the largest addresses.

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