Chain Hop

Chain hopping involves repeatedly transitioning crypto assets across multiple blockchains, introducing new tokens or stablecoins to increase the complexity of the transaction chain and obscure the origins of illicit funds. This layering tactic exacerbates the difficulty of tracing funds back to their criminal source.

Relies on cross-chain bridging or swapping protocols that may lack consistent AML controls across networks.

Chain hopping exploits decentralized, minimal-KYC bridging solutions and unhosted wallets—an emerging unregulated FinTech channel—allowing criminals to repeatedly move assets across blockchains while bypassing consistent AML controls. The repeated swaps and bridging transactions obscure the source of funds, demonstrating how the delivery mechanism itself (rather than the inherent features of a single product) is the principal vulnerability.

• Captures detailed records of deposits, withdrawals, and transfers, including timestamps, amounts, and account identifiers.
• Enables detection of unusual patterns where frequent crypto conversions are combined with fiat transactions to obscure cross-chain activities.

• Captures IP addresses, authentication events, and device fingerprints correlated with blockchain bridging transactions.
• Identifies irregular login patterns and rapid device or IP changes that align with cross-chain hops, suggesting potential illicit access or layered laundering attempts.

• Consolidates verified customer identities, beneficial ownership information, and account activity profiles.
• Detects newly created or multiple exchange accounts used to disperse assets across different blockchains and flags mismatches between declared business purposes and actual cross-chain activities.

• Provides on-chain transaction details (e.g., wallet addresses, timestamps, amounts) across multiple blockchains.
• Enables identification of cross-chain bridging, chain hopping patterns, and usage of decentralized mixers or bridges to obscure the flow of funds.

• Logs cross-chain swaps, conversions, and bridging transactions across multiple exchanges, including timestamps, volumes, and counterparties.
• Uncovers rapid or frequent bridging activities not justified by commercial needs, supporting the detection of chain hopping patterns.

Conduct deeper verification of beneficial ownership and source of funds for clients engaging in frequent or high-value cross-chain bridging. Require supporting documentation when bridging patterns deviate from the customer’s known profile or stated purpose, ensuring that complex chain-hopping does not obscure the origin of illicit funds.

Implement specialized monitoring scenarios to flag repetitive bridging between multiple blockchains, particularly short-interval hops, the use of newly minted tokens, or sudden spikes in cross-chain volume. Investigate bridging involving unhosted wallets or high-risk protocols lacking robust KYC for indications of layering through chain-hopping.

Use advanced cross-chain analytics to trace assets as they move between blockchains, identify bridging patterns indicative of layering, and detect the involvement of newly issued tokens or stablecoins employed to break transactional links. Integrate known aggregator and bridging service data to pinpoint suspicious chain-hopping practices more efficiently.

Restrict or block bridging to and from cross-chain platforms known to have minimal or no KYC requirements, and set transaction limits for bridging that lacks transparent business justification. These controls help prevent criminals from exploiting decentralized or lightly regulated bridging services to launder funds across multiple networks.

Review customers' cross-chain activity regularly to identify escalating or atypical bridging behavior. Require additional information or documentation whenever bridging volumes, token types, or the frequency of cross-chain transactions deviate from established norms, ensuring that legitimate purposes are maintained over time.

• Criminals create or acquire newly minted tokens on less regulated networks and use them for bridging to add layers to the transaction path.
• The repeated minting, swapping, and disposal of tokens across blockchains force investigators to track myriad token movements, each representing a separate ledger entry.
• By introducing lesser-known or custom tokens, criminals exploit limited oversight and heightened complexity, further obscuring the illicit fiscal trail.

• Criminals use newly created or unhosted wallets for each chain hop, ensuring no straightforward KYC linkage and fragmenting the transactional history.
• Deposits and withdrawals from these wallets appear as distinct on-chain events, requiring cross-referencing of multiple wallet addresses and bridging contracts.
• Rapid, pseudonymous wallet creation and disposal on different blockchains allow repeated layering of funds, reducing visibility into the ultimate beneficiary.

• Criminals convert illicit funds into stablecoins and then bridge these stablecoins across multiple chains to maintain consistent value while disrupting transaction continuity.
• Stablecoins are widely supported across different blockchain ecosystems, facilitating quick and repeated chain hops that fragment the transaction trail.
• The stable price component reduces volatility risk when shifting large sums rapidly between networks, further incentivizing their use for obfuscation.

• Criminals perform repeated cross-chain swaps or bridges of well-known public ledger cryptocurrencies (e.g., bridging BTC to ETH and then onward), with each hop appearing as a fresh deposit to different blockchain addresses.
• By leveraging the wide availability of bridging platforms for public ledgers, they effectively break transaction history links, hindering investigators’ ability to correlate the final destination with the initial source of illicit funds.
• Frequent chain transitions complicate monitoring efforts, as investigators must analyze multiple blockchains and bridging transactions to follow the money trail.

• Bridging services often lock the original cryptocurrency on one chain and issue a wrapped token on another, effectively hiding the source of funds.
• Criminals exploit this process by minting and moving wrapped tokens repeatedly, breaking the direct on-chain link to the locked collateral.
• Each wrap-and-unwrap cycle complicates mapping the illicit funds back to their origin, as investigators must trace changes across multiple blockchains.

• Criminals exploit bridging solutions to move assets between distinct blockchains, increasing transaction complexity and reducing traceability.
• Repeated bridging swaps, often using newly created addresses, obscure the fund flow and hinder investigators’ ability to link original and destination addresses.

Illicit operators use chain hopping to obscure the origin and flow of illicit funds by:

• Repeatedly bridging assets across multiple blockchains, challenging standard transaction monitoring by financial institutions.
• Introducing newly minted or less-regulated tokens, complicating analytics and beneficial ownership identification.

This cross-chain approach significantly increases investigative burdens for financial institutions, which must track movements across diverse networks.

Virtual asset service providers facilitate chain hopping by:

• Providing bridging or swapping functionalities across multiple blockchains, often with minimal or no KYC requirements.
• Allowing criminals to create new addresses, deposit funds, and perform rapid cross-chain transfers that frustrate investigators.

Financial institutions struggle to monitor these cross-chain activities when dealing with partial or inconsistent AML controls across different platforms.