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CipherTrace August 2021 Crypto Crime Report: Crypto Fraud Dips as DeFi Hacks Grow

CipherTrace | Aug 23, 2021

Crypto fraud research - CipherTrace August 2021 Crypto Crime Report:  Crypto Fraud Dips as DeFi Hacks Grow

By the end of July 2021, major crypto thefts, hacks, and frauds totaled $681 million. While this number continues to be dwarfed by previous years’ highs, a breakdown of the types of thefts and fraud confirms a trend observed at the beginning of last quarter—DeFi-related crimes continue to grow quarter over quarter, with Q2 2021 netting criminals new highs in DeFi-related proceeds.

When breaking down crypto crimes by those DeFi and non-DeFi related, a clean pattern emerges. By July 2021, DeFi-related hacks total $361 million, already making up three-quarters of the total hack volume this year—a 2.7x increase from 2020. DeFi-related fraud continues to rise, as well.

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DeFi fraud rapid growth - CipherTrace August 2021 Crypto Crime Report:  Crypto Fraud Dips as DeFi Hacks Grow

At the time of this report, DeFi-related fraud accounted for 54% of major crypto fraud volume, whereas last year DeFi-related fraud only made up 3% of the year’s total.

The proliferation and escalation of ransomware targeting critical infrastructure marks another disturbing trend in 2021. In July, REvil ransomware actors demanded $70 million—the highest ever reported ransom— for universal decryption keys as the US Government set its sights on combating ransomware the same way it combats terrorism globally.

On the regulatory front, the world is set to accelerate the implementation of the cryptocurrency “Travel Rule” as the global financial crime watchdog the Financial Action Task Force (FATF) declares that no jurisdictions reported being aware of any virtual asset service providers (VASPs) that are fully compliant with the Travel Rule.

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The lack of Travel Rule implementation globally is a major obstacle to effective global AML/CFT mitigation. As such, the FATF has indicated that one of its major next steps will be to accelerate the implementation of the Travel Rule across the world. This move comes as some countries, such as Canada, have postponed Travel Rule enforcement as VASPs continue to examine possible solutions.

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