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Crypto crime struck a record high in 2021: Chainalysis

By Munikoti Rochan

07:37, 7 January 2022

An image of a hacker trying to steal cryptocurrencies
Growing crypto adoption is boosting crime in the sector – Photo: Shutterstock

Cryptocurrency-based crime hit an all-time high in 2021, according to data available with blockchain research platform Chainalysis.

As much as $14bn (€12.4bn) was routed to illicit addresses over the course of the past year, up from $7.8bn in 2020, per data made public on 6 January.

On the flip side, with investors flocking to digital assets like bitcoin, the cumulative transaction value of all the virtual currencies tracked by Chainalysis rose to $15.8trn in 2021, up 567% from 2020’s levels.

“Given that roaring adoption, it’s no surprise that more cybercriminals are using cryptocurrency,” said the authors of the report.

Rise of theft and criminal holdings

Cryptocurrency theft surged in 2021, with about $3.2bn worth of digital currency stolen last year, a 516% increase over 2020.

Illicit addresses now hold around $10bn worth of digital currency, with the vast majority of this held by wallets associated with cryptocurrency theft. Addresses associated with darknet markets and with scams also contributed significantly to the abovementioned figure.

But, “much of this value comes not from the initial amount derived from criminal activity, but from subsequent price increases of the crypto assets held,” the authors noted.

SOL/USD

171.52 Price
+0.660% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

DOGE/USD

0.13 Price
+1.000% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

ETH/USD

3,512.09 Price
+0.070% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 6.00

BTC/USD

66,743.50 Price
-0.450% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

Moreover, transactions involving illicit addresses accounted for just 0.15% of cryptocurrency transaction volume last year, in spite of the sheer “value of illicit transaction volumes reaching its highest level ever,” they added.

Policymakers scrambling to catch up

Policymakers in several nations are working with regulators to understand the evolving virtual currency market, its risks and rewards.

But “some emerging markets and developing economies face more immediate and acute risks of currency substitution through crypto assets, the so-called cryptoisation”, said a December 2021 post published on the International Monetary Fund’s (IMF) official blog.

“There is an urgent need for cross-border collaboration and cooperation to address the technological, legal, regulatory, and supervisory challenges. Setting up a comprehensive, consistent, and coordinated regulatory approach to crypto is a daunting task,” Tobias Adrian, Dong He and Aditya Narain wrote in the post.

“But if we start now, we can achieve the policy goal of maintaining financial stability while benefiting from the benefits that the underlying technological innovations bring.”

Read more: Three trends to watch as crypto goes mainstream

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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