Illicit decentralised finance (DeFi) transactions have risen over the last three years, blockchain data platform Chainalysis research found.
DeFi, blockchain-based peer-to-peer digital services, protocols have accounted for 97 percent of the $1.68 billion worth of cryptocurrency stolen in 2022, as of May 1, with much of the stolen money being funnelled to North Korean hackers associated with the countrys government.
So far in 2022, DeFi protocols have also been the biggest recipient of illicit funds, taking in 69 percent of all funds sent from addresses associated with criminal activity, compared to 19 percent in 2021, Chainalysis found.
However, illicit activity in the overall cryptocurrency ecosystem has gone down over the last three years, accounting for 0.15 percent of all transaction volumes in 2021, down from 3.37 percent in 2019.
The volume of illicit cryptocurrency transactions as a share of the overall market is at an all-time low. This bodes well for the adoption and utilisation of these digital assets by a broader segment of consumers and businesses, said Ethan McMahon, Economist at Chainalysis.
However, as the cryptocurrency ecosystem matures, cybercriminals are setting their sights on the emerging trends of DeFi (decentralised finance) and NFTs. As with the early days of cryptocurrencies, hackers have been quick to execute their illicit schemes using the newest technologies. For consumer confidence to grow, it is imperative for industry stakeholders to step up and stamp out this abuse of these technologies. With the right tools, government agencies and cryptocurrency businesses can detect, prevent, and investigate illicit activity, McMahon added.
Already in 2022, North Korean hackers have had their biggest year yet for cryptocurrency theft at over $840 million, based entirely on hacks of DeFi protocols.
Attacks on DeFi protocols by North Korean-linked hackers demonstrate the need for these protocols to shore up their systems, not just to protect consumers, but also for national security, McMahon said. Thanks to the transparency of the blockchain, government agencies can identify and target the services they use for money laundering such as OFACs first-ever sanctioning of a mixer a couple of weeks ago and make it more difficult for DPRK and others to cash out their ill-gotten gains. But with hacking at an all-time high, investment in preventative measures should be a priority.