Over the past year, the crypto landscape has witnessed a drastic shift in the tactics employed by cybercriminals. With tightening regulations and enhanced blockchain monitoring, malicious actors always search for the next best method to carry out their illicit deeds. Recently, their primary tool of choice has been cross-chain bridges.
A New Trend Emerges
Historical data from Elliptic, a leading blockchain forensics firm, reveals a significant transition. In the first half of 2022, crypto mixers dominated the laundering scene. Yet, by June and July, a massive pivot occurred. An overwhelming majority of illicit crypto began flowing through cross-chain bridges, marking a stark departure from earlier trends.
Elliptic’s analysis suggests this evolution can be attributed to the “crime displacement” effect. Simply put, as one method becomes overly monitored, criminals seek alternatives. However, the surge in cross-chain bridge usage surpassed even Elliptic’s expectations. This increase aligned closely with the U.S. Office of Foreign Asset Control’s move to sanction Tornado Cash in August 2022.
Prominent cybercriminal organizations like the North Korean-backed Lazarus Group have rapidly adopted these bridges. Notably, they reportedly utilized the Avalanche bridge to move funds from Stake’s significant $41 million exploit in early September.
The latter months of 2022 saw a brief resurgence in crypto mixer popularity. The collapse of RenBridge’s financier, Alameda Research, amidst FTX’s bankruptcy in December was a contributing factor. RenBridge was implicated in laundering an estimated $500 million in its tenure.
The Undeniable Appeal of Cross-Chain Bridges
But why the persistent allure of cross-chain bridges? For one, tracking illicit activities across blockchains poses a significant challenge for forensics firms. Criminals recognize that traditional blockchain analytics tools lag in tracing such activities effectively. Elliptic notes, “Legacy blockchain analytics solutions cannot seamlessly monitor activity across varied blockchains and tokens.”
Furthermore, many stolen tokens are solely transferable via cross-chain bridges. These decentralized finance platforms usually operate without mandatory identity verification.
The implications of this shift are vast. Elliptic approximates that since 2020, a whopping $4 billion in high-risk or illicit cryptocurrencies have found their way through cross-chain bridges.
The cat-and-mouse game between cybercriminals and blockchain forensics continues. As regulations tighten and technology advances, the tactics will undoubtedly evolve. What remains consistent is the importance of vigilance, adaptation, and staying one step ahead in this digital chess match.
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