In a newly released report titled the "State of Cross-chain Crime," blockchain analytics and risk management firm Elliptic has disclosed that the value of illicit crypto laundered through cross-chain criminal activities has surged to a record-breaking $7 billion.
The figure marks a heightened risk, highlighting the growing threat posed by cross-chain crime in the crypto industry.Elliptic's report aims to inform virtual asset services, law enforcement, and government entities about the current state of cross-chain crime, offering case studies and insights into the latest typologies of this criminal activity. It also discusses the evolution of cross-chain crime and examines new sources of risk while showcasing the firm's "Holistic" blockchain analytics capabilities, which provides a specific screening solution for compliance teams "to programmatically scale risk assessment and operate effectively" hosted on Elliptic's Nexus analytics platform.
By definition, cross-chain crime involves the transfer of cryptocurrency between different tokens or blockchains, often done rapidly and without a legitimate business purpose, with the aim of concealing the illicit origin of the funds. Referred to as "chain-hopping" or "asset-hopping," this method of laundering crypto assets is becoming increasingly favored by cybercriminals.
Elliptic's report suggests that cross-chain crime is quickly becoming the preferred money laundering technique for various cybercrimes, including scams and crypto thefts. As traditional methods of obfuscating funds face stricter enforcement actions, criminals are turning to cross-chain crime to launder their ill-gotten gains.
The report's findings are based on research methodologies empowered by Elliptic's Holistic-enabled blockchain analytics capabilities. This technology enables the comprehensive screening, tracing, monitoring, and investigation of activities across multiple blockchains and assets simultaneously, providing insights into the true scale of cross-chain crime.
This latest data comes a year after Elliptic's initial "State of Cross-chain Crime" report, which revealed that $4.1 billion of illicit or high-risk funds had been laundered through decentralized exchanges (DEXs), cross-chain bridges, and coin swap services. It was estimated that this figure would reach $6.5 billion by the end of 2023 and $10.5 billion by 2025. However, the current calculation of $7 billion indicates that cross-chain crime is growing at a faster rate than anticipated. Approximately $2.7 billion was laundered through cross-chain crime in the 12-month period from July 2022 to July 2023.
Several factors contribute to the rise in cross-chain crime. Criminals are increasingly turning to cryptocurrencies other than Bitcoin, such as privacy coins like Monero or stablecoins like Tether (USDT) and DAI. These cryptocurrencies offer attractive features for illicit activities. Additionally, the enforcement actions, including seizures and sanctions, targeting traditional crypto criminal activities have pushed fraudsters toward cross-chain crime.
Notably, cross-asset and cross-chain services, excluding centralized exchanges, do not require identity verification, thus making them attractive to criminals. Mainstream blockchain analytics solutions often lack the capabilities to detect and monitor cross-chain activity, allowing bad actors to make their activities challenging to trace through frequent asset or chain-hopping.
The report highlights the substantial increase in cross-chain crime in the realm of crypto thefts, scams, Ponzi schemes, and illicit laundering, with North Korea's Lazarus Group being a major contributor, having laundered over $900 million through these methods.
Elliptic's focus in the report is on three main types of virtual asset service providers: decentralized exchanges (DEXs), cross-chain bridges, and coin swap services, excluding centralized exchanges. These providers have processed a total of $7 billion in illicit funds up to July 2023.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
