Data encryption can help balance individual privacy and collective security. However, cryptocurrency mixing protocols could face an uphill battle to gain legal acceptance in Europe.
The European Union Innovation Centre, a collaborative initiative bringing together members of European agencies and member states, has published its first report on encryption. The report highlights the “dual-use” nature of encryption technologies.
The good and bad of 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 use the system to evade law enforcement, particularly privacy protocols and tokens that can “obscure” visibility on the blockchain.
The EU Innovation Center has specifically termed 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 do it. It’s easier for bad actors to launder money. and he said he is:
“Mashups and privacy coins have been complicating tracking for years, but Mimblewimble and zero-knowledge proofs are relatively new developments that can also obscure visibility of cryptocurrency addresses, balances, and transactions.”
Decipher hidden paths
Hackers and cryptocurrency scammers also tend to withdraw stolen funds through services like Tornado Cash to deter traceability. However, law enforcement authorities can track these transactions:
“All of these developments may still be subject to investigation by law enforcement, when the suspect’s private keys are accessed.”
The report was prepared by six members of the European Union Center for Internal Security Innovation: Europol, Eurojust, the Directorate-General for Migration and Home Affairs of the European Commission, the Joint Research Center of the European Commission, the Council of Europe’s counter-terrorism coordinator and the European Union Agency for Internal Security. Operational management of large-scale IT systems in the field of freedom, security and justice.
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Alexei Burtsev, developer of cryptocurrency mixing protocol Tornado Cash, was found guilty of money laundering, which could have serious repercussions for open source code developers in May.
The decision was made despite Tornado Cash being a non-custodial cryptocurrency mixing protocol, meaning that funds processed through the protocol are never owned or controlled by it.
Amid Burtsev’s battle with law enforcement, a multi-chain bridge scalper recently used Tornado Cash to withdraw $47.7 million in stolen funds.
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