The Growing Threat of Cross-Chain Crime in the Crypto Industry
In a recently published report titled the “State of Cross-chain Crime,” blockchain analytics and risk management firm Elliptic reveals that the value of illicit cryptocurrency laundered through cross-chain criminal activities has reached a record-breaking $7 billion. This figure highlights the increasing risk 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. It provides case studies and insights into the latest typologies of this criminal activity while showcasing the firm’s “Holistic” blockchain analytics capabilities, which offers a screening solution for compliance teams hosted on Elliptic’s Nexus analytics platform.
The Rise of Cross-Chain Crime
Cross-chain crime involves the transfer of cryptocurrency between different tokens or blockchains with the aim of concealing the illicit origin of funds. This method, also known as “chain-hopping” or “asset-hopping,” is becoming increasingly popular among cybercriminals as traditional methods face stricter enforcement actions.
According to Elliptic’s report, cross-chain crime has become the preferred money laundering technique for various cybercrimes, including scams and crypto thefts. Criminals are turning to this method to launder their ill-gotten gains.
Insights from Elliptic’s Holistic-Enabled Blockchain Analytics
Elliptic’s report is based on research methodologies empowered by its Holistic-enabled blockchain analytics capabilities. This technology allows for comprehensive screening, tracing, monitoring, and investigation of activities across multiple blockchains and assets simultaneously, providing insights into the true scale of cross-chain crime.
The Rapid Growth of Cross-Chain Crime
This latest data follows Elliptic’s previous report on cross-chain crime, which estimated that $4.1 billion of illicit or high-risk funds would be laundered through decentralized exchanges (DEXs), cross-chain bridges, and coin swap services by the end of 2023. However, the current calculation of $7 billion indicates that cross-chain crime is growing at a faster rate than anticipated.
Factors contributing to the rise in cross-chain crime include criminals turning to cryptocurrencies other than Bitcoin, such as privacy coins and stablecoins. Additionally, enforcement actions targeting traditional crypto criminal activities have pushed fraudsters toward cross-chain crime.
The Challenges in Detecting Cross-Chain Crime
Cross-asset and cross-chain services, excluding centralized exchanges, do not require identity verification, 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.
Hot Take: The Escalating Threat of Cross-Chain Crime
The surge in illicit crypto laundered through cross-chain criminal activities to a record-breaking $7 billion highlights the growing threat posed by cross-chain crime in the crypto industry. Criminals are increasingly using this method to launder their ill-gotten gains as traditional methods face stricter enforcement actions.
Elliptic’s report sheds light on the rapid growth of cross-chain crime and emphasizes the need for enhanced detection and monitoring capabilities. As criminals turn to cryptocurrencies beyond Bitcoin and enforcement actions continue to target traditional crypto criminal activities, it is crucial for virtual asset services, law enforcement, and government entities to stay vigilant and develop effective strategies to combat this evolving threat.
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