Cryptocurrency theft grew to $3.2bn in 2021, according to a report by Chainalysis Inc.
In the report, the blockchain data company said this was a 516 per cent increase compared to 2020.
It added that about $2.2bn of these funds was stolen from decentralised finance platforms.
The company said, “Cryptocurrency theft grew even more, with roughly $3.2bn worth of cryptocurrency stolen in 2021 – a 516 per cent increase compared to 2020.
“Roughly $2.2bn of those funds – 72 per cent of the 2021 total – were stolen from DeFi protocols. The increase in DeFi-related thefts represents the acceleration of a trend we identified in last year’s Crypto Crime report.”
According to the report, in 2020, just under $162m worth of cryptocurrency was stolen from DeFi platforms, which was 31 per cent of the year’s total amount stolen.
“That alone represented a 335 per cent increase over the total stolen from DeFi platforms in 2019. In 2021, that figure rose another 1,330 per cent. In other words, as DeFi has continued to grow, so too has its issue with stolen funds,” it added.
According to Chainalysis, theft from DeFi platforms can be traced back to errors in the smart contract code governing them, which hackers exploit to steal funds.
It said the usage of DeFi platforms to launder illicit funds grew from scattered occurrences in 2020 to prevalent ones in 2021.
It added that cryptocurrency usage grew by 567 per cent in 2021 to $15.8tn.
According to the report, the growth of legitimate cryptocurrency usage is outpacing its criminal usage, with transactions involving illicit addresses, representing only 0.15 per cent of cryptocurrency transaction volume in 2021.
However, the company added that the total amount of illicit crypto activity in 2021 was worth $14bn.
It said, “However, we also have to balance the positives of the growth of legal cryptocurrency usage with the understanding that $14bn worth of illicit activity represents a significant problem.
“Criminal abuse of cryptocurrency creates huge impediments for continued adoption, heightens the likelihood of restrictions being imposed by governments, and worst of all victimises innocent people around the world.
“Scamming revenue rose 82 per cent in 2021 to $7.8bn worth of cryptocurrency stolen from victims. Over $2.8bn of this total — which is nearly equal to the increase over 2020’s total — came from rug pulls, a relatively new scam type in which developers build what appear to be legitimate cryptocurrency projects — meaning they do more than simply set up wallets to receive cryptocurrency for, say, fraudulent investing opportunities — before taking investors’ money and disappearing.”
The report said nearly 90 per cent of all the amount lost to rug pulls was attributed to a fraudulent centralised exchange, Thodex, whose Chief Executive Officer disappeared after the exchange halted users’ ability to withdraw funds.
It added that DeFi transaction volume grew by 912 per cent in 2021, although DeFi platforms witnessed the most growth in usage for money laundering at 1,964 per cent.