Record $3.8 billion stolen in crypto hacks last year, says report

Record .8 billion stolen in crypto hacks last year, says report

New York

A record $3.8 billion worth of cryptocurrency was stolen from various services last year, with much of the theft driven by North Korean-linked hackers, according to a report Wednesday from blockchain analytics firm Chainalysis.

The increase in cryptoran, from $3.3 billion in 2021, came as the overall cryptocurrency market suffered significant declines. For example, the value of Bitcoin fell by more than 60% last year.

North Korea was a key driver of the increase in thefts, according to the report. Hackers linked to the country stole an estimated $1.7 billion in cryptopurrency through various hacks in 2022, up from $429 million the year before, Chainalysis said.

Some of the year’s biggest crypto hacks have since been attributed to North Korea. The FBI has blamed hackers linked to the North Korean government for the more than $600 million hack of the video game Axie Infinity’s Ronin network in March and a $100 million Harmony, a cryptocurrency firm, in June.

“North Korea’s total exports in 2020 amounted to $142 million worth of goods, so it’s not hard to say that cryptocurrency hacking is a significant part of the country’s economy,” Chainalysis noted in the report.

US officials are concerned that Pyongyang will use money stolen from crypto hacks to finance its illegal nuclear and ballistic weapons programs. North Korean hackers have stolen the equivalent of billions of dollars in recent years by raiding cryptocurrency exchanges, according to the United Nations.

In addition to hacking cryptocurrency firms, suspected North Koreans have posed as other nationalities to seek work at such firms and send money back to Pyongyang, US agencies have publicly warned.

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In general, decentralized finance (DeFi) protocols were the main target of hackers, accounting for more than 80% of all cryptocurrency stolen for the year, according to the report. These protocols are used to replace traditional financial institutions with software that allows users to transact directly with each other via the blockchain, the digital ledger that underpins cryptocurrencies.

Of the attacks on DeFi systems, 64% targeted cross-chain bridging protocols, which allow users to exchange assets between different blockchains. Bridge services usually have large reserves of various coins, making them targets for hackers. (The thefts at Axie Infinity and Harmony were both bridge hacks.)

While cryptohacks continued to increase last year, there is some reason for hope. Law enforcement and national security agencies are expanding their capabilities to combat digital criminals, such as the FBI’s recovery of $30 million worth of cryptocurrency stolen in the Axie Infinity hack.

These efforts, combined with other agencies cracking down on money laundering techniques, “mean these hacks will become more difficult and less fruitful with each passing year,” according to Chainalysis.

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