$4 Billion Laundered By Criminals Via DEX, Elliptic Report Shows

Blockchain security and analytics firm Elliptic has shown that criminals operating in the crypto ecosystem are exploring decentralized solutions in more ways than are known.

Through its latest report titled “The State of Cross-Chain Crime Reporting 2022,” the analytics firm confirmed that criminals have laundered the entire sum of $4 billion through decentralized exchanges (DEX), bridges and protocols that offer currency exchanges.

According to Elliptic, the use of these protocols depends on the fact that these platforms do not have a strict Know Your Customer (KYC) procedure, which makes carrying out transactions, regardless of their illegitimate status, more accessible. By virtue of their design, decentralized protocols are notably linked to scams, Ponzi schemes, dark web activities, and ransomware, among others.

“To be clear, Elliptic is not saying that DEXs or bridges are exclusively used by criminals; In fact, the opposite is true. They are mostly used by legitimate users. But Elliptic has tracked illicit funds (from hacking, etc.) that have moved through DEXs and bridges to obfuscate their origin,” an Elliptic spokesperson said in a statement.

For most of this year, much emphasis has been placed on the roles that cryptocurrency mixing services like Blender.io and Tornado Cash play in money laundering activities. Both have been sanctioned by the US Treasury Department’s Office of Foreign Assets Control (OFAC) on the grounds that they are connected to North Korea’s Lazarus Group hacking syndicate.

With this revelation from Elliptic, the clamor for intense scrutiny of decentralized protocols will grow in the coming days. DeFi regulation is high on the agenda of most regulators as the industry offers products that compete with the traditional financial ecosystem.

Without existing regulations guiding events in space, regulators believe the implosion experienced in space with the collapse of Three Arrows Capital (3AC), Voyager Digital, and Celsius Network, among others, would have been averted.

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