A bitcoin mixer, also known as a tumbler, obscures the ties between your cryptocurrency addresses and real-world identities. That makes it harder for researchers to track stolen crypto’s movement, a useful tool for criminals.
The US Treasury has sanctioned Mixer for allegedly helping the Lazarus Group hacking gang launder stolen digital assets. But the service has since rebranded as Sinbad.
The Basics
Bitcoin is the ultra-hot cryptocurrency that’s a form of digital money and a worldwide payment system. Unlike minted coins or printed bills, it’s completely virtual and is secured by the blockchain, a decentralized record-keeping system that’s designed to be impenetrable. It’s also borderless, runs 24/7 and is easily transferable from one person to another without the need for a central authority. Ultimately, it’s like the internet for money: purely digital, decentralized, secure and easy to use. In this video, learn about the history of bitcoin, how it works and why it has such a volatile price. Then, dive into the specifics: what are bitcoins, how are they created and how can you buy and sell them? You’ll be amazed at how simple it is! -David Sifry for Business Insider.
Privacy
In an era of unprecedented global surveillance, it’s understandable that many people want to protect their digital privacy. Mixing bitcoins is one of the most common methods to achieve this goal, obfuscating the origins of a given crypto transaction by shuffling coins with others.
Privacy is vital to the success of any blockchain, and bitcoin is no exception. However, the anonymity of bitcoin transactions is a double-edged sword that can be exploited for malicious purposes. This is why it’s essential for the bitcoin ecosystem to offer users tools that enhance their privacy.
The main way to do this is by introducing additional transaction layers into the bitcoin network that make it difficult to link addresses from different users based on the blockchain alone. This is what mixers do, and it’s why they are essential to the security of the Bitcoin ecosystem.
Unfortunately, Western law enforcement has cracked down on a number of mixer services, leaving cybercriminals with fewer money-laundering options than ever before. For example, the US Treasury’s Office of Foreign Asset Controls (OFAC) imposed sanctions on Blender and Tornado Cash in 2022 after Chainalysis determined that they were used by the Lazarus Group to launder millions of dollars worth of stolen crypto.
Fortunately, OFAC’s actions don’t prohibit transactions with all mixers and privacy protocols. In fact, a variety of mixing services continue to operate, and the privacy offered by these solutions is continually improving. This is especially true of noncustodial wallets such as Samourai and Wasabi, both of which integrate Chaumian Coinjoin’s mixing service to offer greater anonymity than other alternatives.
Regulation
Cryptocurrency mixers are used to make actions on the blockchain more private by mixing in data from other transactions. By doing this, it’s harder for malicious actors to trace where a particular bitcoin comes from. Mixing services usually charge a fee for their service.
While cryptocurrency mixers are widely used for legitimate purposes, they have also made headlines for their use by criminals. This has led to sanctions being imposed on centralized mixers like Blender and Tornado Cash by the US Treasury Department’s Office of Foreign Assets Control (OFAC).
Following the sanctioning of these two centralized mixers, Lazarus threat actors moved to other services to obfuscate their stolen proceeds. One of these new mixers was Sinbad, which launched in early October 2022. Analysis of blockchain transactions shows that early incoming payments to Sinbad came from wallets suspected to be operated by Blender’s operator.
While these events highlight the importance of obfuscating digital currency proceeds, regulators are unlikely to ban all mixers and other privacy-enhancing services. However, cryptoasset exchanges and financial institutions must take a proactive approach to managing the risks presented by these services. To do this, they should consider implementing blockchain analytics solutions like those offered by Elliptic. With these solutions, businesses can identify when their customers plan to withdraw funds from a blacklisted mixing or other privacy service and stop those transactions from occurring, ensuring compliance with Bank Secrecy Act/Anti-Money Laundering and Sanctions regulations. bitcoin blender