UK's Law Enforcement Agency Calls for Regulation of Crypto Mixing Tech: Report

The U.K.'s National Crime Agency (NCA) has called for the regulation of crypto mixing technology that can disguise transactions which would otherwise been traceable on the blockchain, according to a report by the Financial Times.

  • "CoinJoin" is a type of send transaction that can be used on the Bitcoin protocol to protect users' privacy. The peer-to-peer, decentralized protocol disguises the origin of bitcoin transactions (inputs) by combining them with many other inputs in a pool and then returning an equivalent amount of funds to the users, obfuscating the details of the bitcoin's origin.

  • "They can be used to provide a 'layering' service, churning criminal cash obscuring its origins and audit trail, similar to how a cash business might be used by criminals to legitimize cash through the banking system," Gary Cathcart, the NCA's head of financial investigation, said in an interview with FT published on Tuesday.

  • The NCA wishes for regulation that would require mixers to comply with money laundering laws, carrying out customer checks and audit trails of funds swapping hands on their platforms.

  • CoinJoin usage hit a peak of 65,000 BTC ($2.5 billion) in January 2021, equivalent to 0.35% of the total bitcoin transacted that month.

  • Some crypto exchanges have responded to crypto mixing by barring transactions from their services that appear to have participated in CoinJoins. Yesterday, zkSNACKs, the company behind the privacy focussed Wasabi wallet, announced it will bar certain bitcoin (BTC) transactions from using its CoinJoin coordination service.

Read more: Bitcoin Mixers: How Do They Work and Why Are They Used?

UPDATE: January, 15, 2022 15:17 UTC: Definition of "CoinJoins" was edited for accuracy and information regarding zkSNACKS and Wasabi wallet was added.