Cryptocurrency Crime Declines In 2020 But DeFi Breaches Rise, Study Finds
NEW YORK, Jan.28 (Reuters) – Losses from cryptocurrency theft, hacking and fraud fell 57% last year to $ 1.9 billion as market participants bolstered security systems, but crime in the “decentralized finance” space continued to grow, according to a report from crypto intelligence firm CipherTrace showed.
Criminals got away with a record $ 4.5 billion in 2019 in the crypto market.
Fraud was the dominant cryptocurrency crime in 2020, followed by theft and ransomware. Half of all thefts, or roughly $ 129 million, were Decentralized Finance (DeFi)-related hacks, which are transactions on platforms that facilitate lending outside of banks.
Cryptocurrencies have attracted renewed scrutiny and interest as institutional investors piled high in digital assets, particularly bitcoin, propelling the latter to a record high of $ 42,000 this month.
“Hack thefts against centralized exchanges continue to decline as these financial institutions mature and adopt tighter security measures,” Dave Jevans, CEO of CipherTrace, said in an interview.
“Regulation and enforcement restrict centralized fraud schemes, which push criminals to exploit decentralized financial services,” he added.
The total number of loans on DeFi platforms stood at nearly $ 25 billion as of Wednesday evening, according to data from industry site DeFi Pulse, up more than 500% from around $ 4 billion in August of last year.
DeFi sites operate on an open infrastructure, with algorithms that set prices in real time based on supply and demand.
“DeFi platforms benefit from many exemptions from the traditional regulatory enforcement regimes that centralized exchanges, money services businesses and banks face,” Jevans said.
“For example, DeFi platforms often do not have to perform a Know Your Customer or anti-money laundering transaction. This makes them ideal places to move and launder money.”
The report also showed bitcoin addresses with criminal links sent at least $ 3.5 billion worth of bitcoin throughout 2020, or less than 1% of total crypto transactions. This figure includes bitcoin addresses controlled by dark markets, ransomware players, hackers, and fraudsters.
Jevans said the bulk of these bitcoins will be laundered by bad actors, which means they will head to an exchange where they will be converted into fiat currency and transferred to a bank.
Reporting by Gertrude Chavez-Dreyfuss, editing by Rosalba O’Brien
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