A report from crypto intelligence company CipherTrace revealed a 57 per cent drop in incidents of cryptocurrency theft, hacks, and fraud with losses amounting to $1.9 billion in 2020 as markets adopted more security systems to prevent such incidents.
However, the report also noted a continued increase in crimes in the ‘decentralized finance’ space.
In 2019, the loss to the crypto market was a record $4.5 billion because of thefts and other criminal activities.
The report showed that the dominant cryptocurrency crime in 2020 was that of fraud followed by theft, and ransomware. hacks tied to decentralized finance (DeFi), which are transactions on platforms that facilitate lending outside of banks, saw at least half of the thefts or about $129 million.
With an increase in interest from institutional investors into digital assets, particularly bitcoin, there has also been a consequent scrutiny and interest in cryptocurrencies.
Bitcoin reached a a record high of $42,000 earlier this month.
“Thefts from hacks against centralized exchanges continue to decrease as these financial institutions mature and adopt stronger security measures,” Dave Jevans, CipherTrace’s chief executive officer, said in an interview.
“Regulation and enforcement are restricting centralized fraud schemes, which are pushing criminals to exploit decentralized finance services,” he added.
Data from industry site DeFi Pulse showed that as of late Wednesday, almost $25 billion of loans in total had been given away in total on DeFi platforms which was 500 per cent higher compared to the $4 billion in August last year
Based on supply and demand, special algorithms set rates in real time on DeFi sites, which run on open infrastructure.
“DeFi platforms enjoy many exemptions from traditional regulatory enforcement regimes that centralized exchanges, money service businesses and banks face,” said Jevans.
“For example, DeFi platforms often do not have to perform customer verification (Know Your Customer) or transaction anti-money laundering. This makes them ideal venues for moving and laundering money.”
According to the report, throughout 2020, $3.5 billion worth of bitcoins at the minimum were sent from bitcoin addresses that were known to have criminal ties. That amount was however less than 1 per cent of the total value of transactions made in all crypto currencies. The figure also includes bitcoin addresses that are allegedly controlled by dark markets, ransomware actors, hackers, and fraudsters.
Bad actors would launder most of those bitcoins, Jevans said. That means such bitcoins would be routed to an exchange where the bad actors would convert the digital currencies into fiat currency and then get the amount transferred to a bank account for further usage.
(Adapted from USNews.com)