Popular on-chain analytics firm, Chainalysis, has revealed that a total of $15B was amassed by crypto scammers last year. The firm disclosed that it is the highest amount ever since it started tracking such amounts more than five years ago. What is more surprising is that the amount was still this high despite governments’ awareness regarding crypto investments and its increased regulation over the sector.
Rising Crypto Scams Amidst Increased Regulation
Chainalysis revealed that this amount stolen by crypto scammers in 2021 was about double that stolen in the previous year. The research follows controversies regarding the regulation of the digital asset industry. While some crypto enthusiasts claim that regulators will only stiffen the growth of the industry, regulators claim that it is their responsibility to protect the investors flocking the crypto space which is why they are establishing firm crypto policies.
Wax blockchain boss, William Quigley opined that it is no surprise that scammers are heavily invested in the crypto space as they always do whenever there is a huge interest in any sector. Quigley added that a light media discussion held in December revealed that the modern tech of the digital asset industry is the major allure for these crypto scammers. They can get away with their scamming activities since most people are technologically deficient.
Popular Scam Instances And Reasons
He also made reference to the token scam involving the popular movie, squid game, where a group of scammers used the popularity of the movie to create a squid token but pulled a rug on the investors and vanished into thin air. The scammers waited for the token to surge in value before making away with nearly $4m in investors’ money.
Despite the rising crime rates in the crypto space, Chainalysis research director, Kim Grauer, opined that those who are cautious enough will still be safe. She further stated that the scammers can only feed on the greed of newbie investors as they are the ones enticed by the quick returns promised by new digital currencies.
However, it has to be noted that investors will remain susceptible to fraud since cryto industry isn’t properly regulated yet. The Chainalysis research further revealed that the fast growth of the BTC network and its token price has caused blockchain activities to rise from $2.4 Tr to nearly $16 Tr. Thus, making the amounts earned through crypto related scams less relevant.
Most Crypto Scams Are DeFi-Related
The Chainalysis data also noted that there was a 920% rise in DeFi transactions last year. Most DeFi tokens have been impressively causing them to be of huge interest to investors. There are several weaknesses in this nascent crypto sub-niche.
Grauer stated that the company’s research revealed that the codes of the majority of these DeFi protocols are weak and make it possible for hackers to exploit. The report revealed that 22% of hacker exploits on DeFi protocols last year were the result of code loopholes.
73% of crypto scams and hacks that occurred last year were DeFi related. It is no wonder that the sec chief claimed that DeFi will be the end of many investors unless that niche is properly regulated with strong investor protections.