Criminals have increasingly used decentralized exchanges (DEXs), cross-chain bridges, and coin-swap services for money laundering, a new report by blockchain analysis firm Elliptic shows. Though use of each typically is “overwhelmingly legitimate,” criminals so far have laundered over $4 billion in illicit crypto through the three services since 2020.
“This expansion of blockchain technology poses many opportunities for criminality,” the Elliptic report states, noting the ability to easily obfuscate transactions and move illicit funds without the anti-money laundering (AML), know-your-customer (KYC), and identity verification barriers they’d otherwise face with a traditional exchange or platform. “All virtual asset services are therefore at risk of what is known as the ‘cross-chain problem.’”
As criminals convert tokens to other tokens and use bridges to move the funds, it’d be very difficult to investigate, Elliptic says, “and in many cases would prove unsuccessful or unfeasible.”
Courtesy of Elliptic
Entities sanctioned by the U.S., for example, account for about $1.5 billion of the illicit crypto-assets processed by the three services, according to Elliptic. Of that, $972 million comes from Tornado Cash, the recently sanctioned crypto “mixer.”
DEXs, bridges, and coin-swap services also appear to be favored by the likes of North Korea’s Lazarus Group, which is suspected of using them to move than $351 million of illicit funds.
The report concludes that over $1.8 billion of crypto assets moving through these services are “potentially associated with entities sanctioned by the United States,” according to Elliptic. “This is just under half of the overall $4.1 billion originating from illicit or high risk origins that have been processed by these services.”
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