“New frontier” of crypto-laundering involves cross-chain bridges and DEXs: elliptical

New research from blockchain analytics and crypto compliance firm Elliptic has revealed the extent to which cross-chain bridges and decentralized exchanges (DEX) have removed barriers for cybercriminals.

In an Oct. 4 report titled “The state of cross-chain crime,” Elliptical researchers Eray Arda Akartuna and Thibaud Madelin took a deep dive into what they described as “the new frontier of crypto-laundering.” The report summarized that the free flow of capital between cryptoassets is now more unhindered due to the emergence of new technologies such as bridges and DEXs.

Cybercriminals have used cross-chain bridges, DEXs and coin exchanges to hide at least $4 billion worth of illegal crypto earnings since the beginning of 2020, it reported.

About a third of all stolen crypto, or roughly $1.2 billion, from the investigated incidents was exchanged on decentralized exchanges.

Delving into the details, the report noted that more than half of the illicit funds it identified were exchanged directly through two DEXs – Curve and Uniswap, with the 1-inch aggregator protocol a close third.

A similar amount (around $1.2 billion) has been laundered using coin exchange services that allow users to exchange assets within and across different networks without having an account.

“Many are advertised on Russian cybercrime forums and cater almost exclusively to a criminal audience,” it noted.

Sanctioned entities are increasingly turning to such technologies to move funds and conduct cyberattacks, according to Elliptic.

“Wallets linked to groups eventually sanctioned by the United States — including those used by North Korea to carry out multimillion-dollar cyber attacks — have laundered more than $1.8 billion through such techniques.”

In a June report on virtual asset risks, global money laundering and terrorist financing, the Financial Action Task Force (FATF) also identified cross-chain bridges and “chain hopping” as a high risk.

Related: $2B in crypto stolen from cross-chain bridges this year: Chainalysis

The Ren bridge was cited as a top choice for crypto-laundering with the vast majority of illicit assets, or more than $540 million, passing through it.

“Ren has become particularly popular among those trying to launder the proceeds of theft,” it said.

A potential solution to reduce crypto theft was proposed by Stanford researchers last month. It involves an opt-in token standard called ERC-20R that provides the ability to reverse a transaction within a set time period.