Crypto Surveillance Startup Elliptic Finds $400M of Illicit Activity in Ripple’s XRP

November 20, 2019
Blockchain analytics startup Elliptic has added XRP, the native currency of the Ripple payment network, to its risk management suite and identified $400 million in XRP transactions linked to illicit activity, including scams, theft and money laundering.
Six-year-old Elliptic has made its name monitoring the bitcoin network and providing data, including suspicious patterns, and analytics services to financial institutions and law enforcement agencies. The crypto businesses and financial institutions it works with will now be able to screen XRP transactions for links to criminal activity and sanctioned entities.
"Our mission is to combat illicit use of crypto assets," said Tom Robinson, chief scientist and co-founder of Elliptic. "With this asset, we now have coverage for 85 percent of all crypto assets and we are enabling companies to help eliminate this activity by not allowing these types of transactions to pass through their platforms. The first step to preventing illicit activity is to properly characterize and identify and track it."
XRP is the third-largest cryptocurrency by market value after bitcoin and ether and an increasingly popular asset in Asia, where spending on blockchain solutions is expected to reach $522.7 million by the end of 2019 and $3 billion by 2023, according to Elliptic.
Japanese banking giant SBI Holdings recently entered into a $50 million investment partnership to utilize XRP for international remittances, according to an Oct. 31 company earnings and strategy report. The SoftBank spin-off has been keen to leverage XRP for years, forming the SBI Ripple Asia joint venture in 2016, comprised of SBI personnel, Ripple, and a consortium of several dozen Asian banks.
SBI also led Elliptic's $23 million Series B fund raise in September.
Elliptic support for XRP involves ongoing dark web research, identifying money laundering patterns, and collection of high-quality data linking XRP accounts to known actors. It is currently in beta, and plans to roll out full support to clients in the first week of December.
Illicit activity was the main driver of crypto news headlines in the industry's earliest days, when bitcoin was known for — more than anything — its role facilitating transactions in the online black market Silk Road.
Robinson said the illicit activity Elliptic has identified in XRP transactions looks more like theft, Ponzi schemes, and XRP being used to purchase stolen credit card details.
"You don't see the dark marketplace activity with XRP like you do in bitcoin," he said. "A lot of the branding and image of Ripple, and XRP, is being targeted at financial institutions. For that reason, criminals using crypto assets are probably less attracted to XRP than to something like bitcoin or ether. We haven't seen large scale adoption in dark marketplaces."
Illicit activity concerns have been revived this year in discussions among global regulators. In April the Parliament of the European Union issued an anti-money laundering (AML) directive with crypto-specific regulations, providing clarity for crypto exchanges and custodians on how to operate in the world's second-largest economy. In June the U.S. Financial Crimes Enforcement Network (FinCEN) put out renewed guidance to provide clarity and regulatory certainty for businesses and individuals involved in cryptocurrency activity, doubling down on its landmark guidance from 2013. That same month, the Financial Action Task Force (FATF), inter-governmental policymaking body, issued new international customer verification standards for the crypto industry, regulating it the same way as it does traditional financial institutions.
Elliptic is looking to include more digital assets into its services as it wades further into the existing global financial system. That could include existing cryptocurrencies as well as those waiting in the wings like Facebook-led Libra, or any other asset its clients may want to integrate into their business one day.
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