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Your cryptographic wallet may contain recycled coins, says a company that specializes in cryptocurrency security. BestMixer, a bitcoin tumbler site that provides untraceable cryptocurrency, may have stained a significant number of portfolios by giving them small amounts of Bitcoin (BTC), a technique known as "dust encryption".
In an email-based promotional campaign started in late October of last year, BestMixer sent small amounts of BTC to the wallet addresses, along with a message that promoted the tumbler service.
Although the quantity sent was often minuscule – between 666 and 888 satoshi – the security company CipherTrace fears that this could cause serious regulatory problems for the sector. Owners of otherwise compliant bitcoin wallets, including exchanges and custody services, could have made transactions – without knowledge or consent – with an alleged money launderer.
David Jevans, CEO of CipherTrace, explained addresses that treat sites like BestMixer will likely attract unwanted attention from financial regulators.
Jevans says that not everyone who uses a tumbler will have questionable reasons, but the presence of illicit transaction output could act as a red flag. From the point of view of the forces of order, there is no way to circumvent the fact that "[Wallet] addresses received funds from a well-known money-laundering service ", he said in a call with Crypto Briefing. This can make it difficult to pass AML controls imposed by law imposed by the responsible services.
Tumbler Services: the downfall of AML
In the past it was difficult to track transactions on a distributed ledger, where the lack of KYC / AML control made it difficult to connect an individual to a portfolio address. This made it an ideal payment solution for illicit activities. Sites such as Silk Road, an online market for controlled substances, have become popular largely on the perception that bitcoin is not traceable.
But this is no longer the case. Many popular cryptographic exchanges have begun to introduce KYC / AML checks for new accounts, allowing crypto location services to develop tools and techniques to link wallet addresses to real identities. Chainalysis, which tracks the Bitcoin and Bitcoin Cash (BCH) activities, works closely with the authorities to create profiles based on transaction history.
Excluding private currencies, cryptocurrency is no longer an anonymous payment solution. Sites like BestMixer allow transactions to remain private by exchanging selected funds with others, making it difficult to track money paths.
In the case of BestMixer, the funds come from three separate pools. Depending on the level of privacy required, users can have their funds mixed with those of other users or from the "Gamma pool", the company's private reserves.
Funds can be mixed quickly on BestMixer, normally no more than it takes to receive confirmation on the network. The company also offers a time lag that makes it difficult for blockchain analysts to track and track transactions. Based in the Caribbean island of Curaçao, BestMixer also has the advantage of lax regulations, in a country that the US State Department considers a haven for money laundering.
BestMixer
In recent months there has been a push to make cryptographic services more adherent. CipherTrace estimates that about 85% of all crypto exchanges now have some form of control.
This choice is often made under the pressure of regulations and has not always been a good thing for business. ShapeShift, a coin converter and a trading platform, added KYC checks in September. The company admitted a few days ago that the move led many of their API partners to move elsewhere: "We expected, but, in any case, it focused on the financial and psychological point of view " Shapeshift's founder and CEO, Erik Voorhees, wrote in an official blog post last week.
There is still a high demand for tumbler services. Jevans explains that setting up something like BestMixer can be relatively simple, requiring little more than a laptop. Most usually charge users a 3-5% commission to mix coins. With minimal overheads, this can be a profitable business.
Still no solution for the encryption of dust
There are currently very few users who can do to prevent their encryption from being dusted with corrupt digital assets. Jevans compares the problem with junk mail: future portfolios, like inboxes, should be able to automatically filter transactions from addresses linked to known dubious or criminal sources.
This, says Jevans, should be a priority. The industry has made some important steps towards establishing appropriate regulatory controls, but it could be useless if regulators are not able to distinguish bad actors from legitimate addresses.
"Actions count" Says Jevans. "The more the AML industry embraces, the more the industry will be supported, and if they do not, cryptography will always remain a marginal business."
The author is invested in digital resources, including BTC mentioned in this article.
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