According to estimates, bitcoin crime will reach a new high in 2021, with fraudsters stealing $14 billion in cryptocurrencies. According to the “2022 Crypto Crime Report,” by blockchain data firm Chainalysis on January 6, this is nearly double the 2020 figure of $7.8 billion.
Most scams have been fuelled by the growing interest in cryptocurrency
The findings come at a time when policymakers are debating how to regulate cryptocurrencies. Officials are eager to safeguard the increasing class of small investors who are flocking to digital currencies.
According to William Quigley, a significant investor and co-founder of the WAX blockchain, with the recent boom in cryptocurrency interest, “Olympic-level fraudsters” have discovered new opportunities for illicit behaviour. Quigley claimed last month at a panel discussion hosted by blockchain startup Light Node Media that the high-tech side of cryptocurrency will continue to attract intelligent fraudsters.
Consider the recent “Squid Game” hoax. In this scam, investors allege that there is a new SQUID cryptocurrency token. SQUID is related to immersive online games that were fake. According to investors, the inventors fled after the currency’s value skyrocketed. According to estimates, investors seemed to have paid out more than $3 million. “Crime is still increasing in absolute terms, but the environment is becoming safer. Of course, there are many limitations, “said Kim Grauer, Chainalysis’s head of research.
Newcomers are coming in by the promise of rapid profits made by crypto supporters. Additionally, they like the idea that they can use bitcoin to hedge against growing inflation. Despite this, cryptocurrencies continue to be prone to inconsistencies in regulation, leaving investors exposed to fraud.
According to the firm’s data over the previous five years, the majority of criminal revenues have always come from financial schemes. However, as bitcoin has developed at a fast speed, total economic activity across all blockchains has surged from $2.3 trillion to $15.8 trillion, reducing the relevance of illegal activity.
There was a lot of fraud in DeFi transactions
According to Chainalysis data, DeFi transactions will increase by 912 percent in 2021. Decentralized tokens such as Shiba Inu have seen tremendous growth, fueling a feeding frenzy among DeFi tokens. However, there are a lot of warning flags when it comes to trading in this nascent crypto economy.
One concern with DeFi, according to Kim Grauer, Chainalysis’ head of research, is that many of the new protocols have code flaws that hackers can exploit easily. Hackers used these code vulnerabilities in 21% of all hacking attempts in 2021.
In 2021, thieves stole $3.2 billion in cryptocurrencies, with DeFi protocol hacks or vulnerabilities accounting for 72% of the total. In October, SEC Chair Gary Gensler warned Yahoo Finance that DeFi would “end poorly” unless investor safeguards were tightened. Earlier this week, the Commodities and Futures Trading Commission fined DeFi protocol Poly Market $1.4 million for operating an “unregistered binary options market,” and ordered the protocol to “wind down” its activities.
Also read: UAE Authorities vs. Cryptocurrency Scammers: Hefty Fines for Scammers
