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The value of illegal cryptocurrency laundered by cross-border crime has reached $7 billion, new figures released today by Elliptic can reveal.
Cross-crime refers to the exchange of cryptoassets between different tokens or blockchains – often in rapid succession and without a legitimate business purpose – to disguise their criminal origins. Also known as “chaining” or “asset hopping”, cross-crime is on its way to becoming the dominant means of laundering crypto-assets.
Our latest data indicates that it is fast becoming the preferred method of money laundering for a range of cybercrimes, including fraud and cryptocurrency theft, as enforcement efforts continue to focus on criminals’ traditional means of concealing funds.
The news comes from findings revealed in our latest State of Cross-chain Crime report, which since last year has been able to use new investigative methodologies powered by Elliptic’s new Holistic-enabled blockchain analytics capabilities.
This next-generation technology – an industry first – enables programmatic and large-scale screening, monitoring, tracking and research of activity across multiple blocks and assets simultaneously. As a result, we were able to gain new insights into the true scale of crime across multiple chains.
The new research comes a year after our first “The State of Cross Crime” report, which at the time found that $4.1 billion in illicit or high-risk funds were laundered through decentralized exchanges (DEX), cross bridges and exchange-of-service coins.
At the time, we estimated that this $4.1 billion figure would rise to $6.5 billion by the end of 2023 and $10.5 billion by 2025. Our latest calculation of $7 billion, however, shows that cross-chain crime is growing at a faster rate than predicted. Indeed, in our new report we found that $2.7 billion was laundered through cross-border crime in just 12 months between July 2022 and July 2023.
Why has crossover crime increased so much?
There are numerous reasons why chain crime is increasing. First, cryptocurrencies other than Bitcoin are becoming increasingly popular among criminals. Many have features that are particularly attractive to bad actors, such as anonymity (privacy coins like Monero) or stable value due to being tied to state-backed currencies (stable coins like Tether (USDT) or DAI).
Furthermore, as we have recently discovered elsewhere, enforcement actions such as seizures and sanctions are increasingly targeting the traditional boundaries of crypto-crime. This causes the so-called “crime displacement” effect, where fraudsters and criminals turn to cross-crime as an alternative.
Fraudsters also take advantage of the fact that many cross-asset and cross-chain services – excluding centralized exchanges – do not require ID verification to be used.
In addition, criminals take advantage of the fact that mainstream blockchain analytics solutions lack the capabilities to detect and track cross-chain activity. These bad actors can therefore make it difficult to track their activities by engaging in fertile property or chain hopping.
Cross-crime status by predicate offense and service used, according to our previous and current assessments
Time frames indicate cumulative calculations from July of each year. These are not annual data.
The greatest increase in cross-crime is evident in the areas of cryptocurrency theft, fraud and Ponzi schemes and money laundering committed by North Korean Lazarus Group. This elite cybercrime organization alone is now responsible for roughly 1/7 of all the range crime we track, having laundered over $900 million through these methods.
Where we focused
As with our initial report on multi-chain crime, we focused on the cross- and cross-exchange of assets facilitated by the three main types of virtual asset service providers – excluding centralized exchanges. These are:
- DEXs: decentralized services – often running on smart contracts – that allow mutual exchange of funds on the same blockchain.
- Cross-chain bridges: services that are typically decentralized and enable cross-chain exchanges of funds on different blockchain platforms.
- Coin exchange services: centralized and usually anonymous services that allow exchanges between different assets without the need to create an account or submit identity verification.
We found that these three types of services processed $7 billion in illicit funds up to and including July 2023. Up from our previous estimate of $4.1 billion in October 2022, this includes (a) new cross-chain crime that occurred from then and (b) any cross crime that we have since identified that occurred prior to that time.
What to expect
Our new report informs virtual asset services, law enforcement and government entities of the current state, including case studies and insight into the latest typologies of crime across different chains.
We also look at how cross-crime has evolved and examine new origins of risk. Included is an overview of Elliptic’s holistic blockchain analytics capabilities, as part of the key considerations necessary to address the compliance and investigative challenges of cross-chain crime response.
Download our report below and learn how to equip yourself with the best tools to give back.
