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2022 Crypto Investments and Their Consequences


2022 Crypto investments and their consequences. The United States and other financial institutions and law enforcement agencies are working hard to support the crypto industry. The United States and its Office of Foreign Assets Control (OFAC) have changed the way sanctions are imposed. The results of this approach have been mixed, and for many in the crypto investment industry, it has set a new standard and surpassed the mark of the US company in the past. The most representative of these cases is the ban against the Ethereum exchange Tornado Cash and its developers.

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The Number of Crypto Investment Restrictions Will Rise in 2022

According to a report from chain-chain research firm Chainalysis, US law enforcement is cracking down on individuals and law firms. In 2018, OFAC announced the first crypto-related sanctions against two Iranians. In the years that followed, these restrictions grew in scope and involvement. As the graph below shows, crypto restrictions continue to increase over the next few years, with 2022 seeing the biggest increase in the number of addresses and legal entities.

OFAC changed its approach when it decided to target crypto wallets. The diagram shows the attention and address assigned to the perpetrators. The report says that law enforcement chose to focus on “larger companies” and different operations.

This change is said to be due to the high number of cyber crime activities recorded in the last two years. The financial institution targets hackers, drug dealers and money laundering activities:

(…) this variety represents a major change from OFAC’s designation before 2021, which were all against individuals and, at the blockchain level, included only small private wallets.

Chainalysis says that billions of dollars will be stolen from digital value services and regulations in 2022 alone, but what are the consequences of this new restriction?

Legal Crypto Companies Are Different, Should They Be Treated Differently?

At this time, things are complicated and the impact of restrictions on the crypto investment industry has changed. In addition to Tornado Cash, the report examines Hydra’s blacknet market and Russian crypto exchange Garantex.

Each of these companies is different and has different roles in the chain before being targeted by OFAC. As shown in the graph below, the amount of money said to be “legal” (in blue) and “illegal” (in orange) varies.

While Hydra and Garantex regularly earn unproven and “risky” money, Tornado Cash sees spikes in these metrics. This flexible exchange allows anyone to trade their tokens, and criminals use it to steal millions of dollars.

Data from the report states that 34% of funds sent to Tornado Cash are believed to have come from illegal sources, while Hydra and Garantex recorded 68% and 6% respectively. However, the unclassified exchanges recorded most of these amounts in a single transaction that was attributed to a single wrongdoer.

In this sense, Chainalysis can identify the wrong events that support these entries. While Tornado Cash mostly profits from hacking and fraud, Garantex and Hydra’s money comes from child pornography, illegal sales, fraud and more.

After the restriction, the entry for Hydra, the German market, is 0. The city authorities upheld the ban and demolished the platform.

Garantex saw the opposite; The wrongdoers sent money to other people on the platform. Under the protection of Russian authority, no one is ready to enforce the sanctions imposed by a US company.

Tornado Cash has also seen a drop in inflows, but the implications are beyond that. The creators of the revolution have realized the consequences in the real world. One of them is still in the hands of law enforcement. Tornado Coin runs on a decentralized blockchain, using open source software. Its ban would have set a dangerous precedent for the fledgling industry. Furthermore, the Chainalysis report shows that restrictions are only effective when the local authorities agree to make them aware.

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