EU Innovation Hub Report Highlights Cryptocurrency Use and Misuse Amid Security Concerns
Summary:
The EU Innovation Hub, in its inaugural report, explores the "dual-use" nature of encryption technologies. It recognizes cryptocurrencies and NFTs' reliance on public-private cryptography, but also highlights issues with illegal activities exploiting these systems. The Hub singled out certain cryptocurrencies and associated technologies for enabling money launderers. Though cyber criminals use services like Tornado Cash, such transactions can still be tracked by law enforcement. The report is a joint effort by six EU agencies. It comes as Tornado Cash's developer faced legal action for money laundering.
Balancing privacy and collective security can be achieved through data encryption. However, adhering to European legislation might be a challenging task for cryptocurrency mixing protocols. A report on encryption has been released by the EU Innovation Hub, a joint venture comprising EU agencies and member states, cautioning on the "dual-use" feature of cryptographic technologies.
The report appreciates the dependence of cryptocurrencies and nonfungible tokens (NFTs) on public-private cryptography for storage, mining, and transfers. Nonetheless, they also recognize the system’s exploitation by malefactors to elude law enforcement, specifically by utilizing protocols and privacy coins that mask transactions on the blockchain.
Particular mention has been made by the EU Innovation Hub regarding cryptocurrencies like Monero (XMR), Zcash (ZEC), Grin (GRIN), Dash (DASH), layer 2 initiatives, zero-knowledge proofs, crypto mixing services, and uncooperative crypto exchanges for enabling money launderers. “Mixers and privacy coins have slowed down tracing for years; however, Mimblewimble and zero-knowledge proofs are fresh arrivals that can hinder visibility of cryptocurrency addresses, balances, and transactions”, they stated.
Cyber criminals have a tendency to funnel stolen funds through services like Tornado Cash to avoid being traced. Despite this, such transactions can still be tracked by law enforcement: "Despite these evolutions, investigating authorities can still examine them, upon gaining access to the suspect’s private keys."
The report on encryption was put together by six members of the EU Innovation Hub for Internal Security: Europol, Eurojust, the European Commission’s Directorate-General for Migration and Home Affairs, the European Commission’s Joint Research Centre, the European Council’s Counter-Terrorism Coordinator, and the European Union Agency for the Operational Management of Large-Scale IT Systems in the Area of Freedom, Security, and Justice.
In related news, Alexey Pertsev, the developer of the cryptocurrency mixing protocol Tornado Cash, was convicted of money laundering in May, potentially resulting in serious consequences for open-source code developers. Despite Tornado Cash being a noncustodial crypto mixing protocol, which implies that the protocol doesn’t retain or control the funds processed through it, the ruling occurred. Recently, Tornado Cash was used to funnel $47.7 million of embezzled funds by a cross-chain bridge exploiter, while Pertsev was engaged in a legal battle with law enforcement.
Published At
6/11/2024 11:07:07 AM
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