The blockchain forensics firm said cross-chain bridges provide an "unregulated alternative" to exchanges for transferring value between blockchains.
Cross-chain bridges have been the target of more than a few hacks this year, but new data from blockchain analytics provider Elliptic alleges one has been used to launder over half a billion dollars in ill-gotten crypto assets.
According to an Aug. 10 report, crypto bridge RenBridge has facilitated the laundering of at least $540 million in proceeds of crime since 2020 through a process known as chain hopping — converting one form of cryptocurrency into another and moving it across multiple blockchains.
Elliptic said that decentralized cross-chain bridges provide “an unregulated alternative to exchanges for transferring value between blockchains.”
For the most part, cross-chain bridges or blockchain bridges are used for legitimate purposes, enabling users to move cryptocurrencies seamlessly across blockchain networks.
Users typically deposit their tokens from one chain to the bridge protocol, which is locked into a contract, then the user is issued the equivalent of a parallel token in another chain.
However, Elliptic noted these bridges have also been used by ransomware gangs, exploiters, and hackers to launder proceeds of crime, with RenBridge accounting for at least $540 million of laundered proceeds since 2020.
Most recently, at least $2.4 million in crypto assets stolen during the Nomad hack on Aug 2 went through the cross-chain bridge, according to the firm.
Elliptic also noted that assets from decentralized finance (DeFi) services worth at least $267.2 million have been laundered using RenBridge in the last two years, while a portion of the $80 million stolen from Liquid Global exchange last year, allegedly by North Korea, has passed through RenBridge.
The Conti ransomware group, which famously attacked the Costa Rican government back in June, has also laundered over $53 million through RenBridge so far.
Elliptic noted that blockchain bridges such as RenBridge poses a challenge to authorities trying to clamp down on individuals and groups using the emerging technology for illicit activities.
"Blockchain bridges such as RenBridge pose a challenge to regulators since there is no central service provider that facilitates these cross-chain transactions," it said.
In a Jun. 30 status report from the Financial Action Task Force (FATF), the intergovernmental organization highlighted increasing risks associated with "chain hopping," particularly in the DeFi space:
“The rapid growth and evolution of the Defi sector is a cause for concern as it could cause risks to accelerate and proliferate.”