We tell you what the experts say about the safest means to invest in crypto assets.
As investments, adoption, and use of digital currencies or cryptocurrencies grow, illicit activities are also increasing around the world. In 2021, an all-time high of 15.8 trillion dollars of legal investment was recorded, representing an increase of 567% over 2020.
However, Chainalysis, a data platform that specializes in blockchain, warns that another 14 billion dollars of it was in illicit transactions, almost double compared to 2020, which was nearly 7.8 billion dollars.
The trend around the world is toward a growing blockchain-based economy. It is an unstoppable phenomenon. How do you know which sites to invest in? The 2022 Crypto Crime Report provides reliable information on the use of cryptocurrencies. One relevant observation is that legitimate investment far exceeds criminal investment.
Crypto crime was tracked from 2017 to 2021, and the year in which illicit transactions were the lowest compared to transaction volume was in 2021, at 0.15%, while they were the highest in 2019, at 3.37%.
The New York-based company points out that —except for the PlusToken scammers who stole 2 billion dollars in cryptocurrencies in 2019— “crime is becoming an increasingly smaller part of the ecosystem.”
Contributing to this is the fact that governments and their justice systems are beginning to play a greater role in combating cryptocurrency-based crime.
The U.S. Department of Justice confiscated 2.3 million dollars in June 2021 from a group of data hijackers called DarkSide.
London’s Metropolitan Police Service also seized 180 million pounds linked to international money laundering with cryptocurrencies.
However, the biggest recovery of stolen assets in cryptocurrencies was in February of this year, when the U.S. government managed to recover 3.6 billion dollars.
The main types of crime associated with digital currencies are the theft of funds and fraud, although there is also money laundering and fraud related to items such as NFTs.
Chainalysis, a company that provides data, software, and research services to companies, governments, and financial institutions, reported that 14 billion dollars have been diverted to illicit activities and theft is the most common scheme among these.
3.2 billion dollars of cryptocurrency theft were recorded in 2021, an increase of 516% compared to 2020.
The majority (72%) were under the DeFi (decentralized finance) protocol, which consists of financial contracts supported by blockchain. The problem is that many of them have not undergone code audits.
Another reason for their vulnerability is that they feature bugs in the smart contract code that hackers take advantage of to steal funds.
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This crime increased 82% last year and was calculated at 2.8 billion dollars of the total, based on estimates of the value of investors’ funds.
The scheme is called a “rug pull” and consists of developers building seemingly legitimate cryptocurrency projects, setting up wallets and investment schemes, and disappearing with the money.
Faruk Fatih Ozer, founder of Thodex, was responsible for 90% of these scams in 2021 in Turkey and remains at large today.
The DeFi protocol has huge areas of opportunity, both for entrepreneurs and cryptocurrency users, although better communication is needed between public and private sectors to guide investors on how to avoid fraudulent projects.
It will also help if the industry takes more drastic measures in the future to prevent tokens associated with potentially fraudulent projects being included in the main investment exchanges.
Chainalysis estimates that by early 2022, there will be illicit addresses with at least 10 billion dollars’ worth of stolen cryptocurrencies remaining in irregular wallets. Much of that amount grew with the rise in the price of crypto assets.
The U.S. Department of Justice has appointed Eun Young Choi to head the FBI’s Virtual Asset Exploitation Unit, which will analyze blockchains and virtual asset seizures.
Choi is a seasoned prosecutor who led the case against a Russian hacker who had helped steal information from more than 80 million JPMorgan & Chase Co. clients.
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