The need for adequate measures to curb illicit activities on cross-chain bridges of blockchains has become increasingly important following a recent analysis. The analysis predicts a rough estimate of over $10 billion by 2025 for illicit financial transactions through crypto.
According to Elliptic (an on-chain analytic firm), there would be a 60% increase in the value of illicit funds laundering through cross-chain bridges. The firm noted the worth of these illegal funds grew from $4.1 billion in June 2022 and is expected to surge by $6.5 billion next year.
This figure is projected to increase over the long term. These crimes have been steadily increasing and are of concern in 2022, with over $2B fleeced by dubious means through cross-chain transactions.
Amongst all other criminal methods, cross-chain transfers have been a targeted means to launder cryptocurrencies. Elliptic’s findings revealed that assets worth billions of dollars had been transacted using Bitcoin, Ethereum and other renowned blockchains.
The criminals often use bridge services such as Synapse, Portal and cBridge to move their illegal funds. The fact that most bridges are used legitimately is undeniable.
However, it is also concerning that the tool has emerged as a critical facilitator in laundering cryptocurrencies. Even though blockchain surveillance, regulations and enforcement agencies have increased, criminals have improvised new measures to use cross-chains and launder illegal funds.
Also read:However, many criminals saw decentralized exchanges as a haven for fleecing funds since transactions on those platforms are unregulated.
The study also noted that the authorization of cryptocurrency mixing service (Tornado Cash) had changed how these criminals function. However, the report admitted that most activities on these platforms are legitimate, but there are still a few illegitimate ones.
Are Centralized Exchanges Free of Illicit Activities?
The study also referenced red flags towards decentralized exchanges. Thus, making centralized exchanges comparably safe and free of illicit transactions.
A prime example of an increase in illicit transactions is the RenBridge. Deep research shows that about $540 million were laundered by criminals on this bridge in August 2022.
Meanwhile, centralized exchanges, known to facilitate cross-chain or cross-asset bridges, are as guilty as the illegal actors. They fail to adhere to Anti Money Laundering (AML) and Know Your Customers (KYC) solutions, which they would have used to screen their potential client’s identities properly.
The increasing prevalence of cross-chain bridges for illegal transactions calls for urgent solutions or measures to curb criminal activities. Therefore, Businesses should see the need to use blockchain analytic tools to facilitate the screening of addresses and transactions.
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