Bitcoin ‘mixing’ is getting a reputation for money laundering as another service admits to illegal activity
Bitcoin mixingservices Helixand Bitcoin Fogare accused of money laundering.
- Privacy advocates insist that anonymity and privacy offered by mixing is a good thing.
- Users of Bitcoin mixing are themselves being monitored and take significant risks.
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Making transactions with Bitcoin isn’t completely anonymous, which is why a lot of people choose to use services like Helix or Bitcoin Fog to engage in Bitcoin ‘mixing’. Because this makes tracking payments more difficult, it’s also a fan favourite for those looking to launder money — as Harmon has admitted.
According to the US Federal Bureau of Investigation (FBI), Helix moved over 350,000 bitcoins on behalf of customers, with the largest volume coming from
In a parallel action, a $60 million penalty was also assessed by the Financial Crimes Enforcement Network ( FinCEN) for Helix’s violations of the US Banking Secrecy Act.
What is Bitcoin Mixing?
A mixing service will take such tainted or identifiable coins, pool them with coins from other people over a large period, and then send back coins at random times. This is claimed to obscure the trail and improve privacy of cryptocurrencies.
As a reminder, most cryptocurrencies use a publicly accessible blockchain – a ledger that records all transactions made in that currency and could be used to trace back the flow of money.
Different types of Bitcoin mixers exist – from peer-to-peer tumblers that are arranged directly by the participants to commercial services like Helix to others like Bitcoin Fog that may charge 1-3% fees to turn a profit.
Impact of Bitcoin Mixing
Privacy advocates bat in favour of mixing, as a way of retaining anonymity in what is an ‘open book’ currency.
The need for privacy is growing as a counter-reaction to repression. When a user once gets his coins on some exchange frozen without any recourse, when his exchange is over complying from fear of regulators, the only defence this user has is to mix his coins for the next time.
Law enforcement officials however, do not see it as a good thing despite the existence of ‘Know Your Customer’ (KYC) regulations to identify transactions. They say that mixing makes their job of tracing illegal transactions harder, affording an extra layer of protection to criminals on the Darknet.
Bitcoiners be warned: this is what happens if @BinanceSGD finds you withdrawing to @wasabiwalletNot surprised tha… https://t.co/MrtDKGLhfs— Catxolotl (@bittlecat) 1576754398000
In addition, a person who sends in their coins for mixing doesn’t own those coins until they are sent back, which has led to fake services that scammed people instead.
On balance, it can be said that a lot of cryptocurrency activity has moved to functioning in the light of day, but Bitcoin mixers still have a long way to go to be seen as entirely legitimate.
Helix is not the only Bitcoin mixing service to come on the government's radar
Before Helix, April 2021 saw the arrest of Roman Sterlingov, alleged to be the mastermind of Bitcoin mixing service Bitcoin Fog. The US Internal Revenue Service (IRS) charged him with laundering more than 1.2 million Bitcoin, of which 23% would pass through the infamous Silk Road.
In their filings, the American agency mentions that they were able to analyse years of blockchain data, track transactions including his server hosting expenses, eventually identifying the home address and phone number of the accused Sterlingov.
These two incidents serve as a reminder that cryptocurrency – especially Bitcoin – is not anonymous and can be traced. Ironically for these two cases, that may be exactly what drives the demand for ‘Bitcoin mixing’, though users say they simply want privacy which is a declared human right and mixing is not for criminals alone.
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