One of the biggest early selling points for cryptocurrency was its security, but a new study by Chainalysis suggests criminals are having no problem making huge profits in cryptocurrency.
Scammers tripled their cryptocurrency revenue in 2019, stealing $4.3 billion worth of cryptocurrency from millions of victims, according to Chainalysis.
Ponzi schemes, including PlusToken, were the largest source of revenue. Blackmail scam payoffs also quadrupled last year to $22.5 million, according to the firm.
Crypto Crime On The Rise
The Chainalysis numbers echo a report by CipherTrace back in November. CipherTrace found $4.4 billion in cryptocurrency theft in the first nine months of 2019 alone, up from just $1.7 billion in 2018.
Regulators around the world have attempted to crack down on the use of cryptocurrency for illegal purchases, money laundering and fraudulent transactions. Due to the fact that many cryptocurrencies are pseudo-anonymous, these transactions can be difficult for law enforcement to trace.
Chainalysis found that more than $1 billion in Bitcoin was sent to and from dark net markets in 2019, more than double the amount sent in 2018. Dark net markets are notorious for the sale of stolen credit card information, illegal drugs and other criminal activity.
More Crypto Regulation Needed?
While cryptocurrency users often protest government regulation of the space, Chainalysis said more oversight is exactly what is needed to keep the boom in cryptocurrency crime in check.
“On the government side, regulators need to be aware of how these scams function and how players like OTC brokers fit in so that they can craft more effective consumer protection laws,” according to the report.
The good news for investors: the spike in cryptocurrency crime doesn’t seem to be impacting the price of bitcoin. The Grayscale Bitcoin Trust (OTC: GBTC) is up 171.1% in the past year.
The bad news for cryptocurrency investors is that this type of criminal activity is a barrier to cryptocurrency becoming more mainstream. The SEC has repeatedly cited concerns over investor safety in rejecting cryptocurrency ETF applications.