Criminals in the cryptocurrency world use blockchain technology as one of the main means to launder money since it allows them to send digital assets across blockchain networks without being traceable or frozen by a centralized service.
They do this with the help of so-called cross-chain bridges, and the dollar amount involved is getting larger and larger every year.
Elliptic, a blockchain analytics firm specializing in blockchain monitoring and analysis, has conducted a comprehensive analysis of a few cross-chain bridges, including RenBridge, to determine how much bitcoin has been laundered each year since 2020, according to new research.
There are several types of cross-chain crime, but the most obvious one is the swapping of crypto assets between different tokens or blockchains without any legitimate purpose - often in quick succession and frequently for the sole purpose of concealing their criminal origins.
There is a growing trend, popularly referred to as "chain-hopping" or "asset-hopping", to launder crypto assets across different chains to minimize the risk of theft or loss.
This was revealed in a recent report published by blockchain industry surveillance firm Elliptic, which found that $7 billion of "illicit or high-risk funds" have been laundered using decentralized exchanges (DEXs), cross-chain bridges, and non-KYC exchanges that do not require customer identification.
In July this year, Elliptic had already reached the staggering $6.5 billion mark in terms of such activities, surpassing a prediction made last year that it would reach that sum by the end of 2023. According to the report, several illicit activities are becoming more complex as criminals take advantage of the growing complexity of cross-chain transfers, including derivative trading and limited orders on market exchanges, to conceal their money laundering activities.
A report released by the United Nations said that approximately $2.7 billion worth of funds were laundered in these manners over one year, from July 2022 to July 2023.
There are several different estimates made by Elliptic analysts of the amount of money that will be laundered through DEXs, bridges, and coin swaps by the end of the year 2023.
By the end of 2025, the amount that will be laundered through DEXs, bridges, and coin swaps will be $10.5 billion.
A mere $4.1 billion was laundered through these platforms at the time, with the amount of illicit assets just over $1.4 billion.
Despite this, Elliptic's estimate to reach $7 billion has been exceeded, and as a result, the current figure will surpass it. In addition to the $2.7 billion laundered through cross-chain and cross-asset services, the company discovered that over the period July 2022 to July 2023, an additional $2.7 billion was laundered.
The Lazarus Group was responsible for $900 million of the total amount of illicit funds laundered through cross-chain bridges, making it the largest source of all the funding laundered through cross-chains in the world.
Elliptic has identified the Lazarus Group as one of the largest sources of illicit funds that are laundered across chains through cross-chain bridges, according to its data. Elliptic's data shows that cross-chain crime is the third most prevalent source of a variety of crimes and that it accounts for approximately one-seventh of the total amount of cross-chain crimes reported.
The criminals have probably come up with more sophisticated cross-chain methods to obscure their laundering activities nowadays, such as derivative trading and limit orders.
A series of cyberattacks have been linked to the Lazarus Group dating back to 2010 that have been suspected of being carried out by a group that has links to the North Korean government.
Although the exact number of these groups remains a mystery, their impact on the world of crypto money laundering cannot be denied, largely due to the sheer size of their membership.
The DEXs are peer-to-peer exchanges where cryptocurrency traders can directly exchange assets and information; cross-chain bridges are protocols used to allow crypto traders to transfer assets and information between different independent blockchain networks using cross-chain bridges.
Coin swaps, on the other hand, refer to a tool that allows users to convert a pair of coins directly into a different exchange rate without having to open an account with each of them.
According to a research report published by blockchain analytics firm Elliptic, several criminal organizations have laundered more than US$4 billion worth of illicit crypto gains using decentralized exchanges (DEX), cross-chain bridges, and coin swap services.
