A recent report from crypto intelligence company CipherTrace has revealed that while losses from cryptocurrency theft, hacks, and fraud dropped by 57 percent in 2020 to $1.9 billion due to enhanced security systems used by market participants, offenses in the decentralized finance’ space continued to grow.
The cumulative loss inflicted in the crypto market by cybercriminals at the end of 2019 was a record $4.5 billion.
Dominant Offenses
Fraud was the predominant cryptocurrency crime in 2020, followed by theft, and ransomware. 50 percent of all thefts (close to $129 million) were hacks tied to decentralized finance (DeFi), transactions conducted on platforms that aid lending outside the purview of banks.
Recent pull towards digital assets, particularly bitcoin which accelerated its valuation to a record high of $42,000 earlier this month has drawn unwanted renewed scrutiny and interest by institutional investors.
Speaking to the media, CipherTrace CEO Dave Jevans opined that “thefts from hacks against centralized exchanges continue to decrease as these financial institutions mature and adopt stronger security measures,” while adding that “regulation and enforcement are restricting centralized fraud schemes, which are pushing criminals to exploit decentralized finance services.”
Data shared by industry site DeFi Pulse has revealed that the total number of loans on decentralized finance (DeFi) sites that are run on open infrastructure, with algorithms that set rates in real-time based on supply and demand, closed in on a transaction value of $25 billion on 27 January 2021, a 500+ percent rise when compared to a meager sum of $4 billion in August 2020.
“DeFi platforms enjoy many exemptions from traditional regulatory enforcement regimes that centralized exchanges, money service businesses and banks face,” Mr. Jevans remarked citing that “DeFi platforms often do not have to perform customer verification (Know Your Customer) or transaction anti-money laundering. This makes them ideal venues for moving and laundering money.”
