Crypto criminals increasingly go chain-hopping to launder money

Quickly swapping crypto assets across multiple blockchains, or different assets on the same blockchain, known as chain-hopping, is becoming a preferred method to launder illicit funds, according to blockchain analysts.

Blockchain intelligence company Elliptic's data shows that $22 billion worth of "illicit and high-risk" assets have already been laundered through decentralized exchanges (DEXes), bridges, and coin swap services.

"The general preference toward mixers for the sake of money laundering has decreased," said Arda Akartuna, Elliptic’s Crypto Threat Intelligence Lead for the APAC region.

According to him, individuals are increasingly suggesting the use of coin swap services, many of which advertise their services on illicit online communities, as a way to complicate the process of following the breadcrumb trail of fund movements.

Elliptic's data shows that 33% of complex cross-chain investigations now involve more than three blockchains, while 27% involve over five blockchains, and 20% span more than ten.

For example, after the $200 million Cetus Network hack earlier this year, criminals swapped the tether (USDT) stablecoin for the USD coin (USDC) stablecoin on a DEX. Next, the funds were bridged to the Ethereum blockchain, while another DEX aggregator was used to swap USDC to ETH, as stablecoins can be frozen by their operators.

Meanwhile, in the CBEX investment scam, the criminals bridged funds between the Tron (TRX) blockchain and Ethereum over a hundred times to make them much more tedious to trace, Elliptic noted.

While there are three main ways for cross-chain money laundering, DEXes, cross-chain bridges, and coin swap services differ in how they operate. DEXes enable users to swap assets into more liquid, easily launderable tokens, such as stablecoins or native blockchain assets, within minutes and without requiring identity verification.

Meanwhile, when using a cross-chain bridge, the original asset is locked in a smart contract, while its equivalent value is released on the destination blockchain from a reserve pool. When it comes to coin swap services, these are centralized platforms that facilitate the swapping of assets across any blockchain without requiring identity verification.

However, as emphasized by Elliptic, chain-hopping in itself is not an indication of illicit behavior.

"It’s a very standard activity in the crypto ecosystem. Bridges have facilitated billions in crypto swaps, and less than 1% of that total volume reflects illicit activity," it concluded.