Mastercard to Implement Payments for NFT and Web3 Projects

June 11, 2022 Bitcoin.com

Edge announces confidential no-KYC digital currency Mastercard

June 8, 2022 Coin Telegraph

The company said there will be a $1,000 daily spending limit, but no personal information is required.

On Wednesday, self-custody crypto exchange Edge announced a no-Know Your Customer (KYC) debit Mastercard that can be funded with Bitcoin and other digital currencies.

Without KYC verification, users would be able to spend their crypto at more than 10 million merchant terminals in the United States. Currently, one can fund the Edge Mastercard using Bitcoin (BTC), Bitcoin Cash (BCH), Dogecoin (DOGE), Litecoin (LTC) and Dash (DASH) directly from the Edge app.

In a statement to Cointelegraph, representatives at Edge say that the card is compliant with Anti-Money Laundering and Counter-Terrorism Financing regulations because of a $1,000 daily spending limit on the card (approx. $30,000 monthly). In addition, the card is only available for use at U.S. merchant terminals. Paul Puey, a co-founder of Edge, commented:

"Without compromising any personal info, and without the usual fees or delays to top up their card, the Edge Mastercard is a true breakthrough for using crypto for day-to-day payments."

Because there is no address associated with the card, users can simply enter any name and address for billing purposes when shopping online.

In addition to its confidentiality, Edge claimed that there are no fees charged on its new Mastercard. When users sell their BTC to add funds, the company uses spot exchange rates from third-party sites such as Coinmarketcap with no margin taken.

The Edge Mastercard will be issued by Patriot Bank, N.A., under license by Mastercard International, and powered by fintech company Ionia. Edge says that it has over 1.7 million accounts across 179 countries on its self-custody cryptocurrency trading platform.

Arthur Hayes to serve 2-year probation owning up to BitMEX’s AML mishap

May 21, 2022 Coin Telegraph

AML

Despite the imminent possibility of serving jail time, proactively owning up to the allegations resulted in Hayes being sentenced to six months of house arrest and two years of probation.

Bringing closure to the long-awaited judgment related to the money laundering activities over the BitMEX crypto exchange, one of the four federal district courthouses in New York reportedly sentenced two-year probation and six months of home detention to founder and ex-CEO Arthur Hayes.

Arthur Hayes, along with the other BitMEX co-founders — Benjamin Delo and Samuel Reed — and the company’s first non-employee Gregory Dwyer, pleaded guilty to the Bank Secrecy Act (BSA) violations on Feb 24, admitting to “willfully failing to establish, implement and maintain an Anti-Money Laundering (AML) program at BitMEX.”

Indictment against BitMEX co-founders and employees for violating BSA. Source: Justice.gov

Pleading guilty to supporting money laundering is a punishable offense, often carrying a maximum penalty of five years prison time. However, both Hayes and Delo made their guilty pleas ahead of the March trial date and had agreed to pay $10 million in criminal fines each.

On April 7, Cointelegraph reported that Hayes voluntarily surrendered to US authorities in Hawaii six months after federal prosecutors first levied charges, to which his lawyers stated:

“Mr. Hayes voluntarily appeared in court and looks forward to fighting these unwarranted charges.”

According to the indictment, public court filings, and statements made in court, Hayes was released after posting a $10-million bail bond pending future proceedings in New York. However, prosecutors from the Office’s Money Laundering and Transnational Criminal Enterprises Unit found the entrepreneurs to be guilty of not implementing AML safeguards, including not fulfilling know-your-customer (KYC) obligations.

Despite the imminent possibility of serving jail time, owning up to the allegations resulted in Hayes being sentenced to a home confinement sentence that requires him to spend the first six months of his sentence from home. In addition, he also agreed to pay a fine of $10 million.

Busting the myth related to the ease of laundering money using crypto, a new analysis highlights the potential of blockchain technology and crypto to track down financial crimes.

While numerous projects within the crypto ecosystem were victims of targeted attacks, bad actors continue to struggle when it comes to cashing out the stolen funds.

Speaking to Cointelegraph, Dmytro Volkov, chief technology officer at crypto exchange CEX.IO, said that the notion of crypto being primarily used by criminals is outdated, adding:

“In the case of Bitcoin (BTC), whose blockchain ledger is publicly available, a serious exchange with a competent analytics team can easily monitor and thwart hackers and launderers before the damage is done.”

NYDFS calls for crypto firms to use blockchain analytics

April 28, 2022 Coin Telegraph

AML

The regulatory agency asked crypto firms to adopt methods to ensure greater risk assessment for potentially problematic transactions.

In a letter published on Thursday, the New York State Department of Financial Services, or NYDFS, recommended that all virtual currency companies operating under New York banking law adopt blockchain analytics to trace transactions. In supporting the decision, the regulatory agency wrote:

"Wallet addresses are typically pseudonymous, with nothing on the face of the transfer tying back to the originator, beneficiary, or underlying beneficial owners."

Therefore, as told by NYDFS, it is vital that such class of firms use blockchain analytics to prevent illicit transactions, such as money laundering or terrorism financing. The agency also outlined three analytical processes that can help combat such measures. These include augmenting Know Your Customer, or KYC, related controls, conducting transaction monitoring of on-chain activity, and conducting sanctions screening of on-chain activity.

Separately, the same day, cryptocurrency exchange Coinbase announced that it was rolling out a novel know-your-transaction, or KYT, service, dubbed "Coinbase Intelligence," to help cryptocurrency firms deal with compliance issues. As told by Coinbase, it is an API-type service that businesses and institutions can use to mitigate regulatory risks on their own platforms. Features include:

Automating real-time transaction monitoring for millions of transactions by generating risk scores for addresses.
Receiving alerts to enable proactive risk management if there are changes to risk profiles.
Easily configuring rule engines and unique risk insights into existing third-party case management tools.
Screening transactions for anti-terror financing and other AML-related flags at scale.

Meanwhile, Coinbase Analytics has been rebranded to Coinbase Tracer to visualize the flow of funds using public attribution data to reduce fraud, demystify counterparty risk, and help flag anti-money laundering risks with risk scores and alerts.

Blockchain and crypto can be a boon for tracking financial crimes

April 28, 2022 Coin Telegraph

AML

The notion of crypto being a tool for money laundering is often propagated by naysayers that include policymakers with a stake in the traditional financial system.

Governments around the globe have also become more aware of the crypto market and the various ways in which it can be regulated.

Despite a growing adoption rate and involvement of mainstream financial giants, however, naysayers continue to portray crypto as a tool for miscreants and criminals.Several crypto platforms and decentralized finance (DeFi) protocols have been compromised over the years, owing to various code vulnerabilities or centralization problems. However, stealing of money is the easiest part, while moving that money and cashing it out is nearly impossible.

This is primarily because most crypto transactions are recorded on a public ledger which acts as a permanent trail, and even if the hacker uses various coin mixing services to hide its origins, powerful transaction monitoring tools can eventually identify such illicit trails.

Even coin mixing services themselves have started to block transactions associated or flagged as illicit.

Through rigorous study, crypto forensic firms such as Chainalysis and Elliptic have further debunked the notion that cryptocurrency provides an ideal tool for financial crimes and masking illicit activity.

A recent report by Chainalysis shows that the percentage of crypto transactions associated with illicit activities in 2021 was a mere 0.15%.

Cryptocurrencies have become more mainstream over the past couple of years, with the public prescription of the crypto market evolving from an internet bubble a couple of years ago to a reliable investment option today.

Dmytro Volkov, chief technology officer at crypto exchange CEX.IO, told Cointelegraph why the notion of crypto being primarily used by criminals is outdated:

“The misconception that crypto is predominantly used by criminals probably has roots in the days of the Silk Road. The truth is that the immutable aspect of the blockchain makes hiding transactions very difficult. In the case of Bitcoin, whose blockchain ledger is publicly available, a serious exchange with a competent analytics team can easily monitor and thwart hackers and launderers before the damage is done.”

He added that “as long as the security team stays proactive and ahead of the curve on blockchain technology, we can continue protecting our customers. As this industry continues to grow, I believe that this myth of crypto being used mainly by criminals will fade.”

Volkov noted that there is an “arms race going on between cybercriminals and the security teams of cryptocurrency ecosystems,” as ne’er-do-wells still try to find instruments to facilitate illicit activities. However, “this is not exclusive to the digital asset industry,” Volkov claimed.

A “paper” trail

There have been several instances in which criminals were found to be trying to launder stolen cryptocurrencies years after the fact, the most recent example being Bitfinex.

Law enforcement agents were able to follow the stolen Bitcoin (BTC) — estimated to be around $4 billion in today’s value — through the blockchain to eventually detain influencer Heather Morgan and her husband Ilya Lichtenstein, a cybersecurity specialist.

Derek Muhney, executive vice president at Coinsource — a Bitcoin ATM provider — told Cointelegraph:

“Look at the outcome of the 2016 Bitfinex hack. The individuals involved attempted to launder approximately $4.5 billion in cryptocurrency by employing several methodical laundering techniques. Still, law enforcement was able to follow the money through the blockchain, identify the perpetrators and recover a significant portion of the stolen money. Cases like this prove that criminals may try to take advantage of crypto but they won’t succeed. Crypto was created for the people and will continue to be for the good guys.”

From an outside perspective, using cryptocurrency for criminal activities might seem ideal. Online transactions can be done quickly and without having to physically move sums of money across far distances. But, those in the crypto world know there are robust protocols in place that allow law enforcement to keep records and verify the identity of customers if need be.

Crypto exchanges play a key role

Crypto exchanges play a key role in identifying and blocking or freezing stolen funds, as they effectively serve as off-ramps for crypto to fiat.

Recently, Binance blocked $6 million worth of stolen funds associated with the Ronin bridge hack. The crypto exchange revealed that the hacker tried to cash out $5.8 million out of the total $600 million via 86 accounts in small batches.

As laundering via centralized exchanges with heavy Know Your Customer (KYC) policies has become difficult, hackers have then turned to decentralized exchanges (DEX) in hopes of anonymizing their movements.

Most of the time, however, these hackers convert their stolen crypto into stablecoins, which, once flagged, can be easily frozen by the issuer. Thus, laundering via DEX platforms has become increasingly difficult as well.

Tigran Gambaryan, vice president of global intelligence and investigations at Binance, told Cointelegraph that while criminals will continue to use crypto for laundering, exchanges are the first line of defense against them:

“Criminals will launder money no matter what form it comes in. When it comes to cryptocurrency, exchanges are the first line of defense and have to be prepared for that. What exchanges need to do is to have a sufficient number of people with the right expertise and the necessary tooling to stop and identify suspicious transactions. Proper KYC and transaction monitoring tools are essential.”

Binance has also helped take down a cybercriminal ring laundering $500 million in digital assets received through ransomware attacks. The exchange has also worked with local governments and law enforcement agencies to tackle ransomware risks.

Fiat currencies are more vulnerable to illicit activities

Some of the biggest naysayers that propagate the narrative of crypto as a tool for criminality are traditional bankers, who themselves are not innocent of ill financial deeds.

Despite governments pouring billions of dollars into stringent banking regulations, including Anti-Money Laundering (AML) measures, major banking institutions have paid over $300 billion in fines since 2000 for a slew of various conduct violations including but not limited to insider trading and AML deficiencies.

Some of the biggest naysayers that propagate the narrative of crypto as a tool for criminality are traditional bankers, who themselves are innocent of ill financial deeds.

Bitstamp asks users to update the source of their crypto, citing regulatory compliance

April 15, 2022 Coin Telegraph

AML

Bitstamp now requires users to provide info like nationality, place of birth and tax residency, in addition to documents proving the origin of crypto and the annual income.

Major global cryptocurrency exchange Bitstamp continues increasing compliance efforts by requesting its users to provide more data like their source of wealth.

In an email notification to users on Wednesday, Bitstamp informed its customers about the ongoing policy upgrades on the platform, with the exchange seeking additional info about its clients, one Bitstamp user told Cointelegraph.

The email reads:

“We work closely with our regulatory partners to ensure we continue to be your trusted exchange. Towards this, we need your account information to be updated, to provide you with the latest products and crypto assets.”

Bitstamp specifically requested users to update the origin of cryptocurrencies stored on the platform for regulation purposes.

*Info required by Bitstamp. Source: Bitstamp*

The exchange provided an official list of examples of documents clarifying fiat-related sources of wealth of deposited funds, including salary and pension payslips, inheritance documents, payslips for savings, gifts, mining receipts and others. Crypto-related sources include fiat and crypto deposits and withdrawals, login info, work contracts, screenshots, hand-written agreements and others.

The exchange now also requires its customers to provide some legal info like nationality, place of birth and tax residency. Additionally, the exchange requested info like the annual income and net worth, intended activities on the platform, annual deposit estimation as well as the source of assets.

*Info and documents required by Bitstamp. Source: Bitstamp*

Prior to sending the latest notice, Bitstamp reached out to its users on March 30, promising rewards for providing more account info:

“If you want to keep on using our services, you’ll need to update your account as some information is out of date. As a ‘Thank You!’ we will reward you with a $25 bonus once you have completed your account info.”

Those who haven’t updated the account have not only missed the bonus but are also n at risk of not being able to withdraw their funds from Bitstamp at all. According to social media reports, Bitstamp has eventually disabled all cryptocurrency and fiat withdrawals for its European customers who have not proved the origin of their crypto on the platform.

The exchange now reportedly asks users to provide documents of where they got the crypto that they deposited on Bitstamp, which only applies to cryptocurrencies bought at external exchanges.

The community has expressed outrage about the policy changes at Bitstamp, with people complaining about Bitstamp not giving them time to withdraw their crypto before announcing the new rules. “You just can't provide new rules when people have already deposited their crypto. If you want to change the rules of the game, you have at least given them a deadline before,” one Redditor wrote.

“We understand that not everyone is comfortable with providing so much information and we especially understand it is very inconvenient. However, please understand that we have to meet the demands of our regulators if we want to keep providing you with our services,” a Reddit user named “Lucas from Bitstamp” wrote in the thread.

Bitstamp did not immediately respond to Cointelegraph’s request for comment. This article will be updated pending new information.

The latest restrictions on Bitstamp are not the first time when the exchange adopted Know Your Customer (KYC) measures. The firm previously adopted somewhat strict policies for withdrawals by its Netherlands-based users, banning withdrawals to external wallets from unverified addresses.

As previously reported, the European regulators were seeking to amend the European Union’s Transfer of Funds Regulation in late March, proposing to report all crypto transfers above 1,000 euros ($1,086) to relevant authorities.

Additional reporting by Tom Farren.

MEP Stefan Berger: ‘Yes, we need regulations, but you still have to leave room to breathe’

April 14, 2022 Coin Telegraph

AML

In an interview with Cointelegraph, the German politician explains why some forces in the European Parliament have suddenly come out in favor of a Bitcoin ban.

The European Parliament’s Committee on Economic and Monetary Affairs recently approved a draft of its comprehensive Markets in Crypto Assets, or MiCA, crypto regulation package. The new framework covers a wide range of crypto-related subjects, such as the status of all major currencies and stablecoins and the regulation of crypto mining and exchange platforms.

Stefan Berger, a member of the Christian Democratic Union (CDU), is the Parliament’s rapporteur for the upcoming MiCA regulation — the person appointed to report on proceedings related to the bill. In the associated negotiations, the German politician vehemently opposed, among other things, a ban on proof-of-work (PoW)-based assets such as Bitcoin (BTC). Cointelegraph auf Deutsch spoke with Berger about the controversies surrounding the MiCA framework and his opinion on the new Transfer of Funds Regulation, also known as TFR.

“Critical examinations of one’s own assets are already taking place”

The European Commission’s first proposal to introduce MiCA in September 2020 came at the right time, said Berger. “We are at the threshold of this technological development, and the regulation has taken up several points that urgently need to be regulated,” he said. MiCA was designed to be “a purely forward-looking financial market regulation” that was to “be kept technologically neutral.”

There was initial agreement on MiCA’s key points in the Parliament, but shortly before the vote, the Left, Greens and Social Democrats suddenly took issue with the regulation on environmental grounds. The discussion revolved around sustainability, said Berger, and whether the European Union should ban consensus mechanisms such as PoW that apparently do not meet certain sustainability criteria.

In the end, Berger introduced his own solution: linking crypto assets to the EU taxonomy, which is already used to assess financial investments and funds for their sustainability. “If we have equity funds evaluated by the commission, we can also evaluate crypto assets or stablecoins,” Berger said. “After that, everyone can decide for themselves whether to continue. The rethinking of the financial products in which one invests and the critical examination of one’s own assets are already taking place.”

PoW ban is off the table

The MiCA regulation is currently being considered in trilogue negotiations between the European Commission, Council of Ministers and European Parliament. The proof-of-work ban is off the table, and Berger hopes that the EU institutions will come up with a taxonomy solution “that will not be too complicated.” He said:

“I think that in the end, we will come to a good result and that the discussion will not move in the direction of banning proof-of-work again, but exactly the opposite.”

The MiCA regulation is expected to come into force between mid- and late 2023. The framework leaves relatively little wiggle room for financial supervisory authorities in the member states, as they must cooperate with European bodies such as the European Banking Authority and European Securities and Markets Authority. Overall, Berger observed, MiCA largely enjoys support from the European crypto community:

“Many member states are interested in having such a regulation that allows growth and keeps developments open. We are the first continent to have such a regulation, so many are looking at it.”

“Yes, we need regulations”

Anti-Money Laundering regulation wasn’t included in the latest MiCA draft, but the European Commission has prepared a separate package, the Transfer of Funds Regulation, to address the issue. This framework lays down stricter disclosure rules for parties engaging in crypto-asset transactions. In principle, Berger welcomes this AML regulation; however, he does not support the part that deals with so-called “unhosted” wallets — crypto accounts that are not managed by a custodian or centralized exchange. Berger said:

“If I pay with 100 euros in cash in a supermarket, I don’t have to show my ID card or identify myself. I simply pay with cash, and that’s it. And why should that be different in the crypto sector? I don’t understand that. We in Germany love cash, and we still accept an EU-wide cash payment cap of 10,000 euros. Why don’t we make the same rules of the game for crypto if we already have these rules of the game? Normal world, crypto world. Yes, we need regulations, but you still have to leave room to breathe.”

“Cryptos are not always evil”

The final decision on the TFR will depend on the results of other trilogue negotiations, and Berger isn’t the rapporteur in that process. The section dealing with “unhosted” wallets was proposed neither by the council nor the commission, Berger said. Similar to the addition of the proposed PoW ban into MiCA, the initiative originated from the side of the Left, the Social Democrats and the Greens.

The negotiations, therefore, could still lead to the crypto-hostile TFR language getting dropped, according to Berger. He also hopes that German Finance Minister Christian Lindner, who belongs to the Liberal faction, will work to ensure that the current draft undergoes changes. That, however, can prove difficult: The majority in the council lean Socialist, and Lindner himself is in a coalition with Social Democrats and Greens in Germany.

“Many who think in centrist terms don’t want decentralized systems anyway. Basically, we also have a bit of a right-left split in the European Parliament over this issue. But I am still optimistic that the commission and the Council of Ministers will see it a little differently.”

Berger noted that it takes time to understand how Bitcoin, stablecoins and other digital assets work, and many politicians in the European Parliament are not quite there yet.

Will their understanding improve? Yes, said Berger, as blockchain technology is becoming more and more important. Even the harshest critics should see that “cryptos are not always evil” — after all, more than $130 million in donations in the form of cryptocurrencies have gone to assist Ukrainians during the country’s conflict with Russia, for example. “And that’s why I’m also doing all this with MiCA, to lay the foundations for a somewhat-changed world.”

This is a short version of the interview with Stefan Berger. You can find the full version here (in German).

Crypto.com’s Cronos partners with Chainalysis to track CRC-20 tokens

April 13, 2022 Coin Telegraph

Analysis

Launched in late 2021, the Cronos network has amassed over 450,000 DeFi and NFT users, requiring proper compliance tools.

Cronos has partnered with the blockchain intelligence firm Chainalysis to enable real-time transaction monitoring tools for the Cronos (CRO) token and all CRC-20 tokens running on the Cronos network, according to an announcement shared with Cointelegraph on Wednesday.

The new compliance integration aims to enable institutions, cryptocurrency exchanges and digital asset funds to track transactions of CRC-20 tokens, allowing users to trace large volumes of activity and identify high-risk transactions. The partnership specifically allows institutions and exchanges to focus on the most urgent issues and properly report suspicious activity.

The integration is yet another milestone in the development and institutional adoption of the Cronos blockchain and digital assets deployed on Cronos. “Application builders and service providers will have access to the most advanced tools and services. The Chainalysis data platform is one of these essential foundations,” Cronos’ managing director Ken Timsit said.

As previously reported, Cronos mainnet launched in November 2021, aiming to provide greater interoperability between the Cosmos and Ethereum Virtual Machine (EVM) ecosystems. Designed to support decentralized finance (DeFi), nonfungible tokens (NFT) and GameFi applications, Cronos has amassed more than 450,000 DeFi and NFT users, inking partnerships with about 200 firms and institutions so far.

Launched in 2016, Crypto.com is one of the world’s largest cryptocurrency exchanges, with daily trading volumes averaging at $3.3 billion at the time of writing, according to data from CoinGecko.

In March 2021, Crypto.com launched its own decentralized open-source blockchain, the Crypto.org Chain, alongside its native token, Crypto.org Coin (CRO). Just about three months after launching Cronos mainnet, Crypto.org rebranded the Crypto.org Coin to the Cronos token in February 2022.

Cronos’ new compliance partner, Chainalysis, is one of the world’s largest crypto and blockchain intelligence firms, known for cooperation with major government agencies and financial institutions in the United States and worldwide.

Last month, Chainalysis partnered with the American financial services organization Cross River to ensure safe cryptocurrency trading and compliance amid the institution expanding its crypto services. The firm previously collaborated with platforms like the crypto-friendly trading app Robinhood and provided its compliance tools to the CryptoKitties game creator Dapper Labs.

Cronos, the Ethereum-compatible blockchain network backed by the major global cryptocurrency exchange Crypto.com, is moving to ensure compliance with a new partnership.

Crypto mixers’ relevance wanes as regulators take aim

April 12, 2022 Coin Telegraph

AML

Cryptocurrency mixers offer users a higher level of privacy and anonymity for their transactions, but often run into trouble with regulators.

Cryptocurrency mixers have been an interesting topic of discussion ever since the advent of cryptocurrencies and their adoption by retail investors around the world.

Cryptocurrency mixers are services that essentially focus on one feature of a blockchain network: privacy.

Cryptocurrency mixers, also known as tumblers, provide anonymity so no one can trace the sender or receiver of a transaction. This can help protect the identity of individuals who want to be completely anonymous and non-traceable. How cryptocurrency mixers work is that they break down the funds sent using the mixer and scramble them with other transactions. They break the link which associates the holder’s identity to the crypto they own.

A process used to anonymize cryptocurrency transactions is known as CoinJoin, created initially back in 2013 by Bitcoin (BTC) developer Gregory Maxwell. In the thread on the Bitcointalk forum, Maxwell elaborated on how these transactions are structured and how the privacy of the transitions can be significantly enhanced without making huge changes to the network. Essentially, this concept involves a mixing block box from where users get their transactions and comprises hundreds of transactions from various wallets. CoinJoin is one of the most popular cryptocurrency mixers on the market.

There are primarily two kinds of mixers, centralized and decentralized mixers. Centralized mixers receive cryptocurrency from users into the mixer and send back different cryptocurrencies by charging a fee. The transaction addresses of the several users who deposit their cryptocurrency into the mixers are managed by a program. Cryptocurrencies returned to users are not the same as those initially deposited, and they may be returned to the user’s account through more than one transaction.

In contrast, decentralized mixers utilize other crypto protocols to obscure transactions using either a coordinated network or peer-to-peer (P2P) networks. Cointelegraph discussed the pros and cons of centralized and decentralized mixers with Marie Tatibouet, chief marketing officer of crypto exchange Gate.io. She said:

“Centralized services are obviously more accessible and more approachable. However, they will have access to your Bitcoin and IP addresses. Hence, they are not the most private service in the world. Decentralized mixers can be a little less approachable, but they are a lot more private.”

However, cryptocurrency mixers and tumblers have a bad reputation since they may be used for money laundering or masking huge amounts of earnings. Although not illegal by law, the service providers stand a chance to get embroiled in a crypto money-laundering investigation. There have been several instances where cryptocurrency mixers and their users have come under the scanner by various jurisdictions and governments.

Mixers could be in a gray area

Most recently, the United Kingdom’s National Crime Agency wants to regulate cryptocurrency mixers under the country’s relevant Anti-Money Laundering (AML) laws.

The agency’s head of the financial investigation, Gary Cathcart, said that transaction mixing tools offer a layer of anonymity to criminals, allowing them to maintain the flow of criminal cash by obscuring its origin.

According to Cathcart, subjecting mixers to AML laws would ensure that mixing services conduct thorough AML checks and audit all the transactions that are passing through the mixer. While on the surface, this might seem like an idea that works, there is a high possibility that such checks would discourage any users attempting to use the mixer.

A closer look at the numbers reveals that the concerns of the crime agencies are not without reason. A recent report from blockchain analytics firm Chainalysis called “2022 Crypto Crime Report” found that the total cryptocurrency value received from illicit addresses hit an all-time high of $14 billion in 2021, nearly doubling from $7.8 billion in the previous year.

At the same time, it is also worth noting that the total market capitalization of the entire market has grown significantly along with the adoption of digital assets by retail investors. Chainalaysis’s crime report also highlights the Illicit percentage share of all cryptocurrency currency, which was at a four-year low of 0.15% in 2021.

This indicates that as the digital asset market develops further, the checks and balances being placed on transaction routes by market participants have been acting as a deterrent for criminals and money laundering activities alike. In fact, most of the transactions flagged as received from illicit addresses are from hackers that stole funds from various DeFi protocols like Wormhole and Poly Network in 2021.

Anton Gulin, regional director at crypto exchange AAX, told Cointelegraph that the whole essence of mixers is not illegal by default. “However, some countries are steadily imposing the Financial Action Task Force’s Travel Rules, providing that exchanges and other virtual asset market players must collect, verify and transmit originator and beneficiary customer information for any cryptocurrency transaction.”

The imposition of this rule prevents regulated entities like centralized exchanges from receiving funds from mixers, which, in turn, puts the entire activity into a gray area. Adrian Jonklass, head of research at blockchain API provider Covalent, told Cointelegraph:

“They operate in a gray area because at a global level the regulations around fundamentals of what comprises virtual assets, whether they fall under money transfer regulations, and or commodity regulations and or securities regulations and or some new category is still being developed.”

The FATF’s rule on the digital assets industry has the potential to curb activity even further. A survey of crypto businesses conducted by Notabene, a crypto compliance firm, found that 70% of the respondents are either already following the Travel Rule or are planning to align their compliance to it in early 2022.

Relevance of crypto mixers in 2022

While cryptocurrency mixers are originally designed to further anonymity and privacy, the evolution of blockchain technology and innovations like whitelisting and decentralized identifier protocols could make them less relevant.

Guilin said that there is no apparent benefit to using a crypto mixer in 2022, stating that “by now, it’s widely associated with something illegal and is indeed related in the majority of cases. Therefore, most of the mixer addresses have been clustered by Know Your Customer providers and are easily traceable.”

This means that users cannot use their funds after mixing them without being traced by the market participants, as transactions withdrawn from a mixer are marked and go against the logic of using a mixer in the first place.

Cryptocurrency mixers definitely still have the potential to appeal to the original crypto romantics that consider the privacy and anonymity of their cryptocurrency transactions a high priority.

However, their relevance today could be waning due to the retail adoption models and other checks and balances that the market participants in the ecosystem are now utilizing. The industry and blockchain technology at large have evolved exponentially since Maxwell spoke of the concept of CoinJoin; It could be important for service providers to realize this as well.

IMF Says Crypto Usage Significantly Correlated with Corruption and Capital Controls

April 11, 2022 The Daily Hodl

KYC