According to a report by CoinDesk, the European Union’s internal security innovation center has warned law enforcement agencies that encrypted platforms such as privacy coins, mixers, and Layer 2 blockchains could make tracking financial flows more complex. The report, jointly released on Monday by organizations including Europol, Eurojust, the European Commission, and others, emphasizes the need for law enforcement agencies to be prepared to deal 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. Tornado Cash co-founder Roman Storm is also facing legal action in the United States. Tornado Cash allows cryptocurrency users to exchange tokens while concealing wallet addresses on networks such as Ethereum, BNB Chain, Arbitrum, Avalanche, and Optimism.
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 notes that the French Financial Markets Authority (AMF) has stated in its report that due to the widespread use of cryptocurrencies, their cross-border nature, and the anonymity provided by platforms such as mixers, cryptocurrencies remain a high-risk source for money laundering.
Related reports: “European Banking Authority warns of money laundering risks from privacy coins and self-hosted wallets; Binance to delist 12 privacy coins in several European countries.”