Law enforcement Jun 09, 2020

Wasabi Crypto Mixer on Europol’s Radar for Aiding Illicit Bitcoin Transactions

Wasabi wallet has come under Europol’s radar for facilitating a large…

The open-source Bitcoin wallet Wasabi has been placed under Europol’s radar after the international law enforcement agency noted a significant amount of dark web transactions being facilitated by the privacy wallet.

Wasabi is currently being investigated for enabling dark web transactions, which have been linked to a host of international criminal activities within jurisdiction of the European Union’s law enforcement agency.

A leaked Europol report on Wasabi scrutinized the wallet’s role in enabling dark web-supported criminal activities. While citing data from Chainalysis, the first part of the report, which was released in April 2020, revealed the primary contribution of Wasabi – a high percentage of crypto deposits made into the wallet were found to originate from dark web platforms.

In a period of three weeks, Bitcoin amounting to about $50 million was deposited into Wasabi, with 30 percent of this figure accounting for deposits made from darknet origins. Considering that dark web transactions take up only 1 percent of total transactions, the significance of Wasabi’s facilitation of dark web economy cannot be overstated.

The second part of the leaked report focused on possibilities concerning Europol’s capacity to point out a Wasabi transaction on the blockchain, including likelihood that the law enforcement agency can successfully demix such a transaction.

By admitting that “things are not looking good”, the report reflected the expected difficulty in tracing Bitcoin transactions occurring via Wasabi wallet. This complexity is brought about by the massive scale with which the transactions happen, and the amount of uniform outputs, both of which pose far too many answers to where the funds were moved.

Otherwise, the Europol intelligence briefing acknowledged a possible loophole that would be exploited – a Wasabi transaction may be successfully traced in case a suspect blunders by grouping mixed crypto together.

Further, EC3, the European law enforcement agency’s specialized arm for fighting crime in the digital age, pointed out an important regulatory challenge. Wasabi’s employment of anonymization techniques for Bitcoin transactions and its TOR usage means that the Bitcoin mixer can easily stay clear of being targeted by a number of anti-money laundering regulations.

The report, which was marked “for law enforcement only”, was recently leaked on the messaging app Telegram. Thereafter, it is said that the Europol press department commented on the issue and confirmed authenticity of the report.

A Longstanding Dispute

Cryptocurrencies present a capable alternative to traditional forms of currency by claiming to offer anonymity. In practice, we all know that digital currencies have their weaknesses, owing to the number of law enforcement operations that have successfully challenged this belief.

Importantly, as noted by Bitfury, there has been a steady growth concerning the use of crypto mixing services by dark web platforms.

The Wasabi case reflects on the longstanding dispute between global governments (and their respective law enforcement agencies) and the proponents of crypto privacy.

A host of police departments have linked the advancement of blockchain technology to the rise and expansion of international crime. In addition, law enforcement agencies have insisted that most digital-age criminal activities have become harder to track owing to cryptocurrency use.

On the other hand, privacy supporters maintain that blockchain technologies are here for public good, and that the tracing of transactions should be made difficult to ensure that users enjoy the benefits that blockchain technology has to offer.

In the end, the choice of total surveillance in tackling international crime while still holding on to the positive aspects of crypto application is a complex dilemma. This calls for a host of ideas that would provide compromise approaches in ensuring that people use cryptocurrencies within well regulated limits.

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