Thefts of cryptocurrencies, hacks, and fraud totaled $1.9 billion in 2020, a 57% drop year-over-year, according to a report from the crypto-intelligence firm CipherTrace. However, crimes in the decentralized finance (DeFi) category continued to grow.

In 2019, in contrast, losses were a record $4.5 billion, CipherTrace said.

The report found that about $129 million in losses were connected to DeFi (decentralized finance) hacks on platforms that enable landing outside traditional banking channels.

“Thefts from hacks against centralized exchanges continue to decrease as these financial institutions mature and adopt stronger security measures,” CipherTrace chief executive officer Dave Jevans said.

Jevans said thefts from hacks against centralized exchanges were decreasing as institutions put in place stronger security that pushed hackers to decentralized services.

According to DeFi Pulse, which tracks the industry, the number of loans on decentralized finance platforms totaled nearly $25 billion, up from $4 billion in August.

“DeFi platforms enjoy many exemptions from traditional regulatory enforcement regimes that centralized exchanges, money service businesses, and banks face,” Jevans said.

“Half of all 2020 crypto hacks were of DeFi protocols  — a pattern that was virtually negligible in all prior years — and nearly 99% of major fraud volume in the second half of 2020 stemmed from DeFi protocols performing ‘rug pulls’ and other exit scams in a pattern eerily reminiscent of the 2017 ICO craze,” CipherTrace said.

In “rug pull” scams, investors liquidate an entire DeFi pool, leaving it with no value.

CipherTrace said fraud connected to blockchain technology vastly exceeded the value of frauds from hacks and thefts in 2020.

Earlier this month, new Treasury Secretary Janet Yellen said she had concerns about the uses of virtual currencies in criminal financing. The price of Bitcoin reached a record $42,000 in January.

According to the CipherTrace report, Bitcoin addresses with known criminal connections transferred at least $3.5 billion of the virtual currency in 2020, less than 1% of cryptocurrency transactions.

Yellen has said the United States must be a leader in digital asset and financial technology.

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