UK Crime Agency calls for tighter regulation of crypto mixers
The UK’s National Crime Agency has called for tighter regulation of crypto protocols that enable traders to obscure transactions.
Decentralized crypto mixers such as Tornado Cash break the visible link of transactions between a sender and receiver on the blockchain, making it harder for law enforcement to trace assets.
While mixers offer traders privacy when trading on public blockchains like Bitcoin and Ethereum regulators have raised concerns about their potential for enabling illicit activity including sanctions evasion, the Financial Times first reported.
“When it comes to crypto transactions, the owner’s identity is already obscured, and the reality is that prying eyes would need additional, hard to get information, to determine a wallet’s balance and its owner,” Gary Cathcart, head of financial investigations at the NCA, told Bloomberg in a statement. “The argument on privacy is therefore a weak one.”
Concerns about mixing protocols which obscure the audit trail on the blockchain have been amplified by the threat of sanctions evasion amid the conflict with Russia.
UK financial regulators including The Bank of England and Financial Conduct Authority have spoken out about the need for crypto firms to ensure that sanctions are imposed. The volume of ruble to crypto trading spiked after Russia invaded Ukraine and punitive economic measures imposed by Western governments sent the price of Russia’s national currency into a tailspin.
Blockchain research firm Elliptic revealed yesterday that it has identified more than 400 virtual asset service providers which allow crypto to be purchased using rubles, most of which can be used anonymously. The firm has linked more than 15m crypto addresses to criminal activity in Russia with several hundred thousand digital asset addresses linked to sanctioned actors.
Read more: Bank of England calls on crypto firms to impose sanctions