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Cryptocurrency Crime Drops in 2020 but ‘Decentralized Finance’ Losses Rise: Study

2021-01-29 15:27:26

Losses from cryptocurrency theft, hacks and fraud declined 57% last year to $ 1.9 billion as market participants boosted security systems, but crime in the "decentralized financial" space continued to grow, a report found from crypto intelligence company CipherTrace.

Criminals got away with a record $ 4.5 billion in the crypto market in 2019.

Fraud was the dominant cryptocurrency crime in 2020, followed by theft and ransomware. Half of all thefts, or about $ 129 million, were hacks related to decentralized financing (DeFi), transactions on platforms that allow for loans outside of banks.

Cryptocurrencies have received renewed scrutiny and interest as institutional investors have been piling up in digital assets, especially bitcoin, which pushed the latter to a record high of $ 42,000 this month.

“Hacker thefts against centralized exchanges continue to decline as these financial institutions mature and adopt tougher security measures,” said Dave Jevans, CipherTrace & # 39; s CEO, in an interview.

“Regulation and enforcement limit centralized fraud systems, which incentivize criminals to operate decentralized financial services,” he added.

The total number of loans on DeFi platforms was nearly $ 25 billion, data from industry site DeFi Pulse showed late Wednesday, up more than 500% from about $ 4 billion in August last year.

DeFi sites run on an open infrastructure, with algorithms that set rates in real time based on supply and demand.

“DeFi platforms enjoy many exemptions from traditional regulatory enforcement regimes faced by centralized exchanges, money service companies and banks,” said Jevans.

“For example, DeFi platforms often do not need to perform customer verification (Know Your Customer) or anti-money laundering transactions. This makes them an ideal place to move money and launder. "

The report also showed bitcoin addresses with criminal ties that had been sent at least $ 3.5 billion worth of bitcoins by 2020, or less than 1% of total crypto transactions. This figure includes bitcoin addresses controlled by dark markets, ransomware actors, hackers, and fraudsters.

Jevans said most of those bitcoins would be laundered by bad actors, meaning they will make their way 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 & # 39; Brien)

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