Global bitcoin crime fell last year, but a type of crypto hacking is on the rise

Cryptocurrency-related crime fell last year to a small fraction of the overall transaction volume. But some targeted hacks have exploded as criminals exploited people working from home during the pandemic.

Last year, illicit activity accounted for 0.34% of all cryptocurrency transaction volume, according to a report by blockchain data company Chainalysis. This was down from around 2% a year earlier.

“We have seen a significant decrease in the share of overall activity associated with illicit entities,” Kim Grauer, head of research at Chainalysis, told CNBC. “Yet ransomware was by far the most important category in terms of business growth and we are seeing an all-time high for dark-net market activity.”

Ransomware is malware that hackers use to infect a computer and then charge a fee to unlock it. This premium is often paid in bitcoin or other cryptocurrencies.

The category only made up 7% of all crypto funds received by criminals, but grew 311% year over year. Chainalysis pointed out that more people working from home are a new vulnerability for businesses – and an opportunity for criminals.

Dark net markets were the second largest crime category, accounting for $ 1.7 billion in cryptocurrency activity, an increase of about 30% from the previous year. Also known as the dark web, the dark net is a network that uses the Internet, but requires specific software and access permissions.

^{Source: Chainalysis}
Criminals have turned to cryptocurrencies such as bitcoin for their ease of sending online instantly.

Cryptocurrencies are also pseudonyms. You can see where the funds have been sent, making it easy to keep track of companies like Chainalysis. But you can’t see who sent them.

These characteristics have caught the attention of regulators who fear the potential role of crypto in money laundering and terrorist financing.

President Biden’s candidate for Treasury Secretary Janet Yellen spoke of the potential for misuse during her confirmation hearing this week, which analysts say weighed on bitcoin prices. The US government must “carefully consider how to encourage their use for legitimate activities,” while “restricting their use for malicious and illegal activities,” Yellen said.

Scams still accounted for over half of all cryptocurrency-related crimes, but have declined significantly year on year.

Grauer de Chainlysis said this was due to increased awareness of events such as the PlusToken Ponzi scheme, which took more than $ 2 billion from victims in 2018.

“People have learned a little bit by following the ‘get-rich-quick’ mentality two years ago,” Grauer said. “Maybe that prompted people to find out about some of these really big Ponzi schemes.”

Bitcoin has taken off as a mainstream investment on Wall Street in recent months. The world’s largest cryptocurrency topped $ 40,000 in early January, spurred by interest from institutions and retail investors, who are now able to buy bitcoin through payment companies like PayPal.

The cryptocurrency fell below $ 30,000 on Thursday.