Cybercriminals have significantly increased their reliance on cross-chain bridges as a means to launder stolen cryptocurrencies, leaving behind traditional cryptocurrency mixers. According to blockchain forensics firm Elliptic, this trend has undergone a rapid shift over the past year.
In June and July, almost all stolen cryptocurrencies were laundered using cross-chain bridges. This marks a stark reversal from the first half of 2022. Elliptic attributes this shift to a phenomenon it calls "criminal displacement." Essentially, when existing methods for illegal activities become heavily regulated or monitored, cybercriminals seek out new techniques to continue their operations. In this case, the pivot to cross-chain bridges has been particularly pronounced.
Elliptic noticed a substantial change in the proportion of laundered funds passing through mixers versus cross-chain bridges between July and September 2022. This shift aligned with the imposition of sanctions by the US Office of Foreign Assets Control on Tornado Cash in August 2022.
Among the platforms benefiting from this shift, the Avalanche Bridge drew attention, with groups like the North Korea-backed Lazarus Group using it. In a notable incident, this group leveraged the Avalanche Bridge to facilitate the movement of stolen funds after exploiting Stake's $41 million vulnerability on September 4, as reported by blockchain security firm CertiK.
While cryptocurrency mixers experienced a modest resurgence between November 2022 and January 2023 following the closure of RenBridge, the appeal of cross-chain bridges soon led cybercriminals back to them in greater numbers. One reason behind this preference is that it is challenging for blockchain forensics firms to effectively track illicit activities across multiple blockchain networks in a scalable manner.
Elliptic also noted that many stolen tokens can only be exchanged through cross-chain bridges, and most decentralized financial services do not require identity verification. This combination of factors has made cross-chain bridges an attractive choice for cybercriminals. Elliptic estimates that approximately $4 billion in illegal or high-risk cryptocurrencies have been laundered through cross-chain bridges since 2020.
