With criminals constantly adapting their tactics to stay ahead of law enforcement, a new report highlighted a significant shift in the methods used by bad actors to launder illicit crypto assets.
The study, by crypto analytics firm Elliptic, revealed the value of illicit crypto assets laundered through cross-chain bridges has surged in recent months, overshadowing the use of traditional mixers.
This revelation will be a focal point of discussion at the upcoming Benzinga's Future of Digital Assets conference on Nov. 14, where industry experts will delve into the challenges and solutions surrounding crypto crime displacement.
Elliptic's findings underscored the concept of "crime displacement," in which criminals modify their tactics in response to preventive measures.
After facing U.S. sanctions against their preferred laundering tool, Tornado Cash, in August 2022, the group transitioned to using the Avalanche Bridge.
The broader trend indicated that as U.S.-led enforcement actions targeted mixers and non-compliant crypto exchanges, especially those based in Russia, offenders were pivoting to cross-chain solutions.
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Cross-chain crime, which involves the anonymous swapping of crypto assets across blockchains to hide their origins, has seen a significant uptick since the advent of decentralized finance (DeFi) in 2021.
Elliptic's data showcased a clear shift from mixers to cross-chain bridges, especially after the sanctioning of Tornado Cash in August 2022 and the subsequent shutdown of RenBridge, a popular bridge backed by the now-defunct Alameda Research.
So, why are criminals increasingly favoring cross-chain crime?
The report cites several reasons.
Many illicit gains are now in lesser-known cryptoassets, specific to DeFi protocols, which are primarily exchangeable through cross-chain services.
Moreover, these services often do not mandate identity verification, making them attractive to those wishing to remain anonymous.
Furthermore, traditional blockchain analytics tools struggle to trace illicit activities across multiple blockchains or tokens, giving criminals an advantage.
Elliptic's 2022 data revealed a staggering $4 billion of illicit or high-risk crypto assets were laundered using cross-chain methods.
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