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EU Innovation Center criticizes privacy coins and cryptocurrency mixers in

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Data encryption can help balance individual privacy and collective security. However, cryptocurrency mixing protocols may face an uphill battle for legislative acceptance in Europe.

The European Union Innovation Centre, a collaborative initiative bringing together members of EU agencies and member states, has published its first report on encryption. The report emphasizes the “dual-use” nature of encryption technologies.

source: European Union Agency for Criminal Justice Cooperation

The good and bad in encryption

The report supports the inherent reliance of cryptocurrencies and non-fungible tokens (NFTs) on public-private cryptography for storage, mining and transfers. However, some bad actors are using the system to evade law enforcement, specifically protocols and privacy coins that can “obscure” visibility on the blockchain.

The EU Innovation Center specifically called out cryptocurrencies such as Monero (XMR), Zcash (ZEC), Grin (GRIN), and Dash (DASH) as Layer 2 initiatives, zero-knowledge proofs, cryptocurrency mixing services, and non-compliant cryptocurrency exchanges. In order to make it. It is easier for bad actors to launder money. He Said:

“Mashups and privacy coins have complicated tracking for years, but Mimblewimble and zero-knowledge proofs are relatively new developments that can also obscure the visibility of cryptocurrency addresses, balances, and transactions.”

Decrypt hidden paths

Cryptocurrency hackers and scammers also tend to withdraw stolen funds through services like Tornado Cash to deter traceability. However, law enforcement authorities can track such transactions:

“All of these developments can still be investigated by law enforcement, when the suspect’s private keys are accessed.”

The report was prepared by six members of the European Union Center for Innovation in Homeland Security: Europol, Eurojust, the European Commission’s Directorate-General for Migration and Home Affairs, the European Commission’s Joint Research Centre, the Counter-Terrorism Coordinator of the Council of Europe and the European Union Agency for Homeland Security. . Operational management of large-scale IT systems in the field of freedom, security and justice.

Related: North Korea used Tornado Cash to withdraw $147.5 million in stolen HTX funds: UN

Alexei Burtsev, developer of the Tornado Cash cryptocurrency mixing protocol, was found guilty of money laundering, raising potentially serious repercussions for open source code developers in May.

The ruling was made despite Tornado Cash being a non-custodial cryptocurrency mixing protocol, meaning that funds processed through the protocol are never held or controlled by it.

Amid Burtsev’s battle with law enforcement, a cross-chain bridge scalper recently used Tornado Cash to withdraw $47.7 million in stolen funds.

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