EU Innovation Center Mixer Privacy Coin and Layer 2 Network to Increase Difficulty in Tracking Law Enforcement Money Flow

EU Innovation Center Mixer Privacy Coin and Layer 2 Network to Increase Difficulty in Tracking Law Enforcement Money Flow

EU Innovation Center Mixer Privacy Coin and Layer 2 Network to Increase Difficulty in Tracking Law Enforcement Money Flow

According to a report by CoinDesk, the European Union’s Internal Security Innovation Center has warned law enforcement agencies that encryption platforms such as privacy coins, mixers, and Layer 2 blockchains could complicate efforts to track financial flows. The report, jointly released on Monday by organizations including Europol, Eurojust, the European Commission, and others, emphasized the need for law enforcement to prepare for dealing with these tools in their investigations.

Mixers for cryptocurrencies have recently come under scrutiny. The developer of the mixer protocol Tornado Cash, Alexey Pertsev, was recently sentenced to over five years in prison by a Dutch court, as prosecutors successfully argued that the platform was created for money laundering. Co-founder of Tornado Cash, Roman Storm, is also facing legal action in the United States. Tornado Cash allows cryptocurrency users to hide their wallet addresses on networks such as Ethereum, BNB Chain, Arbitrum, Avalanche, and Optimism while exchanging tokens.

Privacy coins like Monero have built-in privacy features in their protocols, hiding the identities of senders and receivers, as well as the funds being sent. The report also noted that the French Financial Markets Authority (AMF) stated in its report that due to the popularity of cryptocurrencies, their cross-border nature, and the anonymity provided by platforms like mixers, cryptocurrencies remain a high-risk source for money laundering.

Related report: “European Banking Authority warns of money laundering risks posed by privacy coins and self-custody wallets; Binance to delist 12 privacy coins in several European countries.”