Elliptic Analysis | Cross-chain bridge RenBridge facilitates $540 million money laundering involving North Korea, Russian criminal organizations

After the mixing service protocol was sanctioned by the U.S. Department of the Treasury due to money laundering issues, blockchain data analytics company Elliptic also pointed out on the 10th that cross-chain bridges are facing similar problems. In their report, Elliptic analyzed the cross-chain bridge RenBridge and found that it has been involved in hundreds of millions of dollars of money laundering activities over the past two years, gradually becoming a channel for criminals to escape funds.

RenBridge Money Laundering Analysis Report

According to a report by Elliptic, cross-chain bridges have become an important component of money laundering activities, allowing funds to be transferred across different chains to evade financial tracking.

Based on Elliptic's analysis of cross-chain transactions, the RenBridge has been involved in laundering at least $540 million in cryptocurrency since September 2020, with these funds originating from various crimes such as theft, fraud, ransomware, and more.

Additionally, funds stolen from exchanges and DeFi protocols amounting to $267 million have been laundered through RenBridge, including $33.8 million in assets stolen from the Japanese centralized exchange Liquid in August last year, an incident later linked to North Korean hackers.

Among all money laundering activities related to RenBridge, stolen funds represent nearly 50%, followed by ransomware.

Elliptic also mentions that part of the laundered funds comes from other cross-chain bridges, like the recent hack of the Nomad cross-chain bridge which saw $2.4 million in stolen funds laundered through RenBridge.

Furthermore, a Russian ransomware group is also a fan of RenBridge, with laundered amounts reaching $153 million.

"Ransomware groups, fraudsters, and even North Korean hackers are shifting from regulated cryptocurrency exchanges to decentralized, unregulated alternatives." said Tom Robinson, Senior Engineer at Elliptic.

Challenges of Regulating Cross-Chain Bridges

Elliptic states that blockchain cross-chain bridges like RenBridge pose challenges for regulatory authorities as they do not facilitate cross-chain transactions through central service providers. Instead, transactions are processed by a network of thousands of anonymous validators called "Darknodes."

In response to this phenomenon, David Carlisle, Vice President of Regulatory and Policy Affairs at Elliptic, believes that cross-chain bridges are both a blessing and a curse for the industry. While they can provide people with more payment and transaction options to help expand the market and are crucial for DeFi development, they also act as alternatives to the banking system in the crypto industry. However, due to their unregulated nature and susceptibility to hacking, they are also used for money laundering activities.

Nevertheless, David Carlisle believes that this situation will eventually improve, and he expects regulatory bodies to start addressing cross-chain bridge issues in the next 6-12 months.