The United Kingdom’s National Crime Organization (NCA) is trying to regulate cryptocurrency mixers under the country’s anti-money laundering laws.
Coin mixing tools are popular in the decentralized world to maintain the privacy of transactions. These tools often combine several transactions to obscure the origin of a particular transaction. Then the recipient receives the transactions from a mixing “black box” that includes hundreds of transactions from different wallets. Although privacy-focused, these tools often face the wrath of regulators as it is also a well-known way for hackers and criminals to launder their money.
Gary Cathcart, the head of the NCA’s financial investigation, claimed that these transaction-mixing tools provide a layer of anonymity to criminals that can be used to “churn criminal cash that obscures its origin and audit trail.”
Cathcart called on regulators to bring these open-source mixing tools under money laundering regulations. This would ensure that such service providers carry out mandatory anti-money laundering checks and audit transactions through the platform, reported Financial times.
NCA did not respond to Coin-Crypto’s request for comment at the time of publication.
Another hurdle for regulators is the open-source and decentralized nature of such services, where tracking and controlling funds could become a complex task. This issue was highlighted during the Candian Freedom trucker movement, where Nunchuck, a non-custodial wallet service provider, explained that they have no information about their users, which is due to the design of the decentralized technology.
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The crypto service providers are relatively compliant with the regulations around the world and have changed their services to keep up with the regulators. In this case, some are even a step further. Wasabi, a popular privacy-focused wallet that offered crypto mixing services through CoinJoin, announced Monday that they would be blocking transactions with illegal links.
It is also important to note that despite obscuring the source of the transactions, these transactions can ultimately be traced back to the source account with several powerful analytical tools, which was the case in Binance’s $40 million hack.
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Although the perpetrators behind the hack used a chip mixer to launder the stolen funds, the increased activity in the mixing tool revealed their identities and later the majority of the funds were traced.