By Donald Haymatter
Just a year after Elliptic highlighted a surge in cross-chain crypto laundering, pegged at $4.1 billion, the blockchain analytics firm has unveiled new data. Their latest research reveals a dramatic increase, with the figure jumping to approximately $7 billion between July 2022 and July 2023.
The Rise of Cross-Chain Crime in Crypto Laundering
Cross-chain crime refers to the rapid exchange of cryptoassets between different tokens or blockchains to disguise the illegal origins of these assets. It’s becoming the go-to method for cybercriminals to launder money as it allows them to evade traditional tracking mechanisms.
This practice, also referred to as “chain-hopping” or “asset-hopping,” is gaining traction among criminals committing scams and crypto thefts, especially as law enforcement ramps up actions against conventional money laundering routes.
Elliptic’s recent “State of Cross-Chain Crime” report unveils a rapid increase in the adoption of this money laundering method. Just a year prior, the report documented $4.1 billion laundered through decentralized exchanges, cross-chain bridges, and coin swap services.
Elliptic had projected this figure to escalate to $6.1 billion by 2023 and $10.5 billion by 2025. However, the pace of cross-chain crime has exceeded expectations, with the laundered amount hitting $7 billion in just one year, from July 2022 to July 2023, underscoring the urgency to counteract this escalating trend.
Drivers of the Surge in Cross-Chain Crime
The spike in cross-chain crime is attributed to multiple factors according to the report. One prominent reason is the inherent attributes of certain crypto assets – anonymity and stability. Coins like Monero, known for preserving user privacy, and stablecoins like USDT and DAI, which are pegged to government-backed currencies, are particularly alluring to illicit actors.
Moreover, the landscape of crypto criminality is evolving. Increasing enforcement actions, including seizures and sanctions, have been honed in on traditional areas of crypto criminal activities.
This pressure is driving a “crime displacement” effect, where criminals pivot to cross-chain crime as a new haven to continue their illicit activities, exploiting the complexities and nascent monitoring capabilities of this domain.
Criminals are exploiting gaps in the current regulatory and technological frameworks surrounding cross-asset and cross-chain services. The absence of mandatory ID verification on many of these platforms, excluding centralized exchanges, provides an avenue for illicit activities to thrive untracked.
Additionally, the deficiency in mainstream blockchain analytics to effectively monitor and detect cross-chain activities further amplifies the issue. Criminals adeptly navigate these shortcomings, utilizing asset and chain-hopping techniques to obscure their trails and complicate the tracing of illicit funds.
Key Players and Alarming Numbers
The extent of illicit activities conducted through DEXs, cross-chain bridges, and coin swap services has surpassed previous estimations. The report confirms that these platforms have processed an astounding $7 billion in illicit funds up to July 2023.
This revelation is not just a reflection of the new instances of cross-chain crime identified post-October 2022 but also includes previously unaccounted crimes that have now been brought to light.
The notorious North Korean cybercrime group, Lazarus, has been pinpointed as a significant contributor to this alarming statistic. The group is attributed with laundering a staggering $900 million, accounting for approximately one-seventh of the total cross-chain crime recorded within the last year.
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