Cryptocurrency mixers allow bitcoin and other cryptocurrency users the opportunity to mix their transactions together with other on-chain transactions, from different individuals, in an attempt to hide the traceability of their transactions. This is necessary for those who want anonymity on the blockchain, as most cryptocurrencies are pseudo-anonymous, rather than truly anonymous. As a result, several high volume mixing services have emerged which allow users to mask their transaction history on the bitcoin network.
However, as the average cryptocurrency user is generally unconcerned with operating with true anonymity on the blockchain, some authorities believe cryptocurrency mixers have instead become synonymous with criminality and money laundering. The Organized Crime and Corruption Reporting Project (OCCRP) have reported that up to US$800 million per year is laundered through cryptocurrency ‘darknet’ markets.
Whether bitcoin mixing services themselves are responsible for money laundering, Europol recently reported that a task force of Dutch authorities, in close cooperation with authorities from Luxembourg and the Netherlands, have recently seized six servers related to bitcoin mixing, from the now defunct company ‘Bestmixer.io’. Whilst the majority of cryptocurrency mixing services operate using the CoinJoin protocol to pool funds, Bestmixer.io was a centralized and custodial mixing service.
In a Europol press release, it was reported that The Dutch Fiscal Information and Investigation Service (FIOD) have seized and completely closed down Bestmixer.io, one of the largest cryptocurrency mixing services, following a lengthy investigation which had been ongoing since mid-2018. Online security company, McAfee, established by outspoken cryptocurrency advocate John McAfee, assisted with the investigation.
Discussing the legality of cryptocurrency mixers in an official blog post, Head of Cyber Investigations for McAfee Advanced Threat Research, John Fokker, commented that “The legality changes when a mixing service advertises itself as a success method to avoid various anti-money laundering policies via anonymity. This is actively offering a money laundering service.” The blog post provides archived versions of Bestmixer.io, which clearly show that the service was explicitly offering customers a way to avoid anti-money laundering (AML) procedures.
Bestmixer.io allowed customers to mix bitcoins, bitcoin cash, and litecoins, and Europol estimate that since its establishment in May 2018, the service has mixed some US$200 million in cryptocurrency before it was seized.
In their press release, Europol confirmed that their joint investigation into Bestmixer.io had already revealed that a good portion of the funds which had been mixed via the service were of criminal origin, stating that “In these cases, the mixer was probably used to conceal and launder criminal flows of money.”
At this time, it is unclear whether criminal charges will be brought against the Bestmixer.io service itself, although as they were actively advertising their service as a way to obfuscate funds and avoid AML, it’s highly likely that criminal proceedings shall follow.