Crypto Launderers Shun Centralized Exchanges, Shift Focus to DeFi and Cross-Chain Services, Chainalysis Reports

A recent comprehensive report published by blockchain intelligence firm Chainalysis indicates a major inflection point in how illicit cryptocurrency funds are being laundered. Historically, centralized exchanges (CEXs) served as the crucial bottleneck where criminals converted crypto to fiat. However, strict adherence to global Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations by major CEXs has significantly deterred this activity.

Chainalysis data reveals a notable reduction in the volume of illicit funds flowing directly into centralized exchanges. This exodus is primarily fueled by the increasing difficulty criminals face in bypassing rigorous compliance screening. Consequently, launderers are now aggressively utilizing Decentralized Finance (DeFi) platforms, particularly decentralized exchanges (DEXs), cross-chain bridges, and unregulated instant exchangers, to obscure the origin and destination of stolen or illicit crypto assets.

Key findings show that DeFi protocols, often operating without geographical restrictions or mandatory KYC checks, are becoming the preferred conduits for obfuscation. Cross-chain bridges, which allow assets to move seamlessly between different blockchains (e.g., Ethereum to Solana), are being exploited for ‘chain hopping,’ making tracking significantly more complex for investigators who traditionally rely on tracking activity within single networks.

The report emphasizes that while mixers remain a powerful tool for obfuscation, heightened regulatory scrutiny and sanctions imposed on services like Tornado Cash have forced many professional launderers to adopt a portfolio approach, using a combination of DEX liquidity pools and bridges to muddy the transaction history.

This shift presents a critical challenge for global law enforcement. Investigators must now dedicate specialized resources to tracking transactions across multiple chains and analyzing complex smart contract interactions, moving away from relying solely on cooperation with centralized entities that previously served as reliable choke points for intelligence gathering.

Source: Crypto launderers are turning away from centralized exchanges: Chainalysis