Elliptica uses artificial intelligence (AI) to crack down on Bitcoin money laundering

Blockchain analytics firm Elliptic said its researchers have made progress in leveraging artificial intelligence (AI) to detect money laundering in Bitcoin.

A recent paper detailing this research was co-authored with researchers from the MIT-IBM Watson AI Lab. Elliptic revealed successful identification of illicit proceeds deposited into a cryptocurrency exchange, new patterns of money laundering transactions, and previously unidentified illegal wallets by using a deep learning model.

The firm said the findings are already being used to improve its products.

Exposing hidden patterns of money laundering

The underlying data has been made public. With more than 200 million transactions, this dataset will allow the community to create new AI methods to identify illegal cryptocurrency activities, Elliptic said in a statement this week.

Instead of identifying transactions made by criminals, a machine learning model is trained to recognize “subgraphs,” which are essentially strings of transactions that indicate Bitcoin laundering. This method concentrates on identifying these subgraphs rather than illicit wallets, allowing Elliptic to focus on the broader “multi-hop” laundering process rather than the specific chain actions of individual criminals.

Elliptic said it used an undisclosed cryptocurrency exchange to test whether this technique could detect money laundering attempts through it. Of the 52 predicted “money laundering” subgraphs that end up with deposits to this exchange, 14 were confirmed by the exchange to be linked to the flagged users. On average, less than one out of every 10,000 accounts is flagged, indicating that the model is performing well.

“We’ve barely scratched the surface of what’s possible in this domain, but this work has already brought benefits to Elliptic users. Further collaboration and data sharing will be key to further advancing these techniques and combating financial crime in cryptoassets.”

The role of AI in the Blockchain sector

AI tools are slowly showing an exceptional ability to analyze vast data sets to spot patterns beyond human perception, such as identifying illegal money movements within the Bitcoin economy.

So it’s no surprise that venture capital investment in Web3 and AI startups will top $637 million by 2023.

In fact, AI agents are predicted to dominate the blockchain sector by 2024 to establish a more secure and efficient ecosystem, as stated in a Nansen report.

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