But despite the market downturn, it was also a banner year for “crypto-based crime,” as a recent Financial Times report noted, drawing on recent data from the data analytics firm Chain analysis:
Illegal crypto transactions topped $20 billion last year. That figure was up from $18 billion in 2021, after a huge spike in deals involving companies targeted by US sanctions (the majority coming from Russian stock exchange Garantex). Ransomware attacks are down slightly year-over-year, but still account for nearly half a billion dollars. The count (total value of illegal crypto transactions) is very likely to increase over time. The figure does not include $23.8 billion in money laundered using cryptocurrency in 2022, up 68% from 2021.
In the UK alone, the National Crime Agency estimates that over $1 billion in illicit funds are transferred overseas using cryptocurrency every year.
The relationship of cryptocurrency to criminal activities
Dragan Boskovic, Founder and Director of the Blockchain Research Laboratory at Arizona State University, said in exclusive statements to Sky News Arabia that:
According to a report by the United Nations Office on Drugs and Crime (UNODC), the estimated value of the illicit trade is approximately $2.2 trillion worldwide. It is important to note that this estimate includes not only drugs, but also other forms of illegal trade, such as human trafficking, counterfeiting and environmental crimes. According to statistics from Chainalysis, less than 1% of global illicit trade is conducted using cryptocurrencies. However, there may be reason to believe that the actual percentage is lower than this.
He points out that, like any other technology, cryptocurrencies can be used by criminal organizations; On the grounds that the ease of cross-border and near-instantaneous transfer of cryptocurrency assets makes it an attractive option for such illicit activities.
At the same time, he points out that, however, “all transactions are recorded digitally, and the use of cryptocurrency does not necessarily protect against criminal activity”, pointing out that “the use of cryptocurrency can provide law enforcement with a more accurate view of criminal activity,” he said.
He explains this by saying:
Forensic tools for blockchain and cryptocurrency analysis are based on the fact that the flow of digital assets/money on a blockchain can be relatively easy to track and interpret. Court records show that investigators are able to trace records of cryptocurrency transactions to a specific digital wallet, which links the digital identity to a natural person who owns the wallet. By establishing this link between the two identities, administrators can access the wallet using a private key or password. The methods used to connect digital identity and physical persons use advanced data analytics and artificial intelligence technologies.
The founder and director of the “Blockchain” research laboratory at Arizona State University, in his interview with “Sky News Arabia Economy”, points out that these methods allowed the FBI, for example, to intercept the payment of the recent ransom to cyber attackers. on the colonial pipeline in the United States of America. .
Money laundering operations
In related context, the aforementioned Financial Times report quotes the director of the National Center for Economic Crimes, Adrian Searle, as saying:
Cryptocurrencies are now used as part of the money laundering methodology – and they are built into it. While the percentage of money laundering carried out in cryptocurrencies is still relatively low, it is expected to increase rapidly, facilitating international criminal networks on an unprecedented scale.
On the other hand, cryptocurrency advocates claim that cryptocurrencies can also be used for good.
Blockchain data analytics firm Elliptic reportedly says $200 million in cryptocurrency has been donated to pro-Ukrainian causes since the war began, and more than $80 million has been sent directly to the Ukrainian government .
And the newspaper article adds: But this needs to be put in context: the positives will always outweigh the negatives. Of the estimated $3.8 billion in cryptocurrency stolen by hackers last year — another new record — North Korea-linked hackers stole about $1.7 billion, according to Chainalysis. The United Nations alleges that this money goes to the country’s ballistic missile program.
“Cryptocurrencies are not only used to speculate and buy drugs online, they are also used for more obscure criminal activities,” the report states.
Cross-border money transfer… without censorship
For his part, an information technology expert from the United States, Dr. Ahmed Banafa, said in exclusive statements to “Sky News Arabia Economy” that “the ease of use of digital currencies has left an opportunity for criminals to send digital money across borders”. without any supervision to countries that have trade. “digital so that they can convert bitcoin, for example, into a fiat currency like the dollar or the euro.”
He points out that this is the reason for the recent increase in ransomware attacks; On the basis that the hackers requested the transfer of cryptocurrencies to their digital wallet, where they could convert them into dollars outside of countries such as the United States of America.
Banafa explains that one of the main advantages of using cryptocurrency is the fact that transactions cannot be undone, once they are sent they are gone, and the only way to get that money back is that the other party returns it.
At the same time, he adds, “One way to control digital money transactions like Bitcoin is on exchanges like Coinbase where you have to register to join and you need government-issued information to use. exchange as well as their own digital wallet, so dealers can send and receive digital money, but in a censored environment and they can freeze accounts if anything is suspicious. ”
alternative system
But he confirms that some countries do not have this kind of control and that is the reason why money laundering is prevalent in these countries and criminals there create wallets and transfer money freely, adding: “ I see digital currencies as a financial system parallel to the SWIFT banking system, these countries benefit from the activities as a source of income, especially if they are subject to some kind of sanction and cannot obtain fiat, by trading with cryptocurrency to exchange or bring fiat without the control of SWFIT.
He concludes by saying, “Digital currencies are the future, but we need regulations that protect user deposits and monitor exchanges to ensure there is no mismanagement or abuse of trust,” referencing the famous case of the FTX exchange and what happened to billions of dollars in user deposits, it vanished within minutes. .
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