Some $400 million worth of XRP are often traced back to a spread of Ponzi schemes and darknet activities, Elliptic said during a report released Wednesday. While which will sound sort of a lot, it represents just 0.2 percent of XRP transactions. By comparison, $829 million of bitcoin, or 0.5 percent of that network’s transactions, are spent on the dark web, the analytics vendor said.
“Regardless of the quantity , it just demonstrates that there’s illicit activity happening during this coin,” said Tom Robinson, chief scientist and co-founder of Elliptic. “Therefore, if you’re a business handling a number of these transactions then you would like to be checking for it because you do not want to be the organization that’s getting used to launder those proceeds.”
Such concerns are especially acute for XRP’s target market, regulated financial institutions. Ripple, the distributed ledger technology (DLT) startup that owns an estimated 60 percent of the XRP supply and periodically sells the tokens to fund operations, has been pitching banks software that utilizes XRP for the previous couple of years.
A Ripple spokesperson said: “Like other cryptocurrencies, XRP is open source and decentralized – it’s available to anyone to use. Ripple enabled XRP transactions are secure and thru regulated institutions.”
Blockchain forensic firms like Elliptic tackle crypto involvement in things like drugs, weapons, child sexual assault material and ransomware-as-a-service. within the case of XRP, much of the transactions associated with scams and Ponzi schemes, said Robinson.
For instance, an outsized chunk was accounted for by the Plus Token “investment” scheme. Earlier this year, Chinese authorities arrested six Chinese nationals on the Pacific island of Vanuatu suspected of orchestrating the scam, which collected billions in crypto from people in China and South Korea .
There has been a rise within the use of crypto to get things like stolen mastercard numbers on the dark web and Elliptic had detected variety of these sites accepting XRP alongside other cryptos.
But Robinson said the relatively bit of illicit use of XRP could be down its association with traditional finance, compared to other cryptocurrencies.
“The incontrovertible fact that the Ripple network itself has been targeted at large traditional banks maybe doesn’t resonate with criminals trying to use it,” he said.
Ripple began to supply an inexpensive and efficient cryptocurrency bridge to attach correspondent banks then provide near-instant cross-border payments. Back in 2015, it had been among the primary crypto companies to receive a fine from the Financial Crimes Enforcement Network (FinCEN) for AML failings. But this was viewed as a positive among a fledgling crypto industry because it meant Ripple was closer to being regulated than other crypto firms at that point .
The same might be said for XRP within the context of getting its tires kicked by Elliptic, said Robinson, since highlighting illicit XRP activity will only improve the network’s credibility.
“Wherever you’ve got any quite value transfer mechanism there’s getting to be potentially some illicit use,” said Robinson. “I think having clarity of that and having the ability to understand where it’s happening should give banks comfort instead of a cause for concern.”
To be clear, Elliptic was handling XRP, the crypto asset only. “We haven’t had any interaction with the Ripple company,” said Robinson.
Another large investor in XRP is Japan’s SBI Holdings (previously referred to as Softbank Investment), which also led a $23 million investment round in Elliptic earlier this year.
Tomoyuki Nii, military officer for overseas investment at SBI Investment, said in an interview at the time that the bank was interested in Elliptic because it had been the simplest blockchain sleuthing firm when it involves XRP.