The firm said the sharp increase in money laundering activity in 2021 was not surprising, given the significant growth in both legitimate and illegal cryptocurrency activity last year.
Money laundering refers to the process of disguising the origin of illegally obtained money by transferring it to legitimate businesses.
About 17% of the $8.6 billion laundered went to decentralized finance applications, Chainalysis said, referring to the sector that facilitates cryptocurrency financial transactions outside of traditional banks. This was a 2% increase in 2020.
Mining pools, hedge markets and cryptocurrency mixers also saw substantial increases in the value received from illicit addresses, the report said. Mixers often combine potentially identifiable or tainted cryptocurrency funds with others to hide the trace of the fund’s original source.
Wallet addresses associated with thefts sent just under half of their stolen funds, or more than $750 million in total crypto, to decentralized finance platforms, according to the Chainalysis report.
Chainalysis also clarified that the $8.6 billion laundered last year represents funds derived from crypto crime, such as darknet market sales or ransomware attacks where the proceeds are in cryptocurrencies instead of fiat currencies.
“It is more difficult to measure how much fiat currency derived from conventional crime – traditional drug trafficking, for example – is converted into cryptocurrency to be laundered,” Chainalysis noted in the report.
“However, we know anecdotally that this is happening.”
By Gertrude Chavez-Dreyfuss, from Reuters agency