Losses from cryptocurrency thefts, hacks, and fraud declined to US$1.8 billion for the first 10 months of the year compared with last year, but crime in the hot “decentralized finance” sector rose, according to a report from crypto intelligence company CipherTrace.
NEW YORK: Losses from cryptocurrency thefts, hacks, and fraud declined to US$1.8 billion for the first 10 months of the year compared with last year, but crime in the hot “decentralized finance” sector rose, according to a report from crypto intelligence company CipherTrace.
Crypto crime hit US$4.5 billion globally in 2019.
“What we have seen is that exchanges and other cryptocurrency players have implemented more security procedures,” Dave Jevans, CipherTrace’s chief executive officer, told Reuters.
“They have taken the guidance and implemented the procedures to secure their funds better. So you’re going to see less mass-scale hacks.”
So far this year, losses from thefts and hacks, excluding misappropriation and fraud, grew to US$468 million as of end-October, up 30per cent from US$361 million for the whole of last year, the CipherTrace report said. About 20per cent of those hacks, or roughly US$98 million, came from “decentralized finance” or DeFi, which are transactions on platforms that facilitate lending outside of banks.
The total number of loans on DeFi platforms was US$12.6 billion as of late Monday, industry site DeFi Pulse data showed, up more than 200per cent from roughly US$4 billion in August. DeFi sites run on open infrastructure, with algorithms that set rates in real time based on supply and demand.
The surge in DeFi was what ultimately attracted criminal hackers, resulting in the most hacks for the sector this year.
In 2019, DeFi hacks were virtually negligible, CipherTrace said.
“Companies and individuals have rushed DeFi products to market that have not gone through security verification and validation,” said Jevans. “So people are figuring out that there’s a weakness here.”
With DeFi networks permissionless by design, which means they often lack clear regulatory compliance, anyone in any country is able to access them with little to no customer-verification hurdles involved.
As a result, Jevans said DeFi can easily become a haven for money launderers.
(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Matthew Lewis)