Cryptocurrency mixer tools have recorded a significant rise in use this year. Mixers are tools used by cybercriminals to anonymize transactions and hinder tracking. Such tools make it hard for authorities to recover stolen funds.
Increased use of crypto mixers
Mixers are used to offer more privacy in cryptocurrency transactions. However, these tools are now being used by cybercriminals that do not want to leave any traces that could be used by blockchain investigators.
Mixer tools are not solely created for use by cybercriminals. There are legitimate reasons behind using these tools, such as seeking financial privacy. Private transactions are important in areas where people are oppressed by the government.
However, these mixers do not require any KYC identification information from users, which is the case with crypto social trading platforms. This makes them attractive to cybercriminals that want to wade off investigators. It is estimated that around 10% of all the funds sent from illicit wallet addresses is sent to mixers.
Despite their attractiveness toward cybercriminals, crypto mixers are not illegal. However, there are regulatory guidelines that govern the companies that operate these tools. In the US, the Financial Crimes Enforcement Network (FinCEN) requires mixers to register with the regulator and ensure compliance with anti-money laundering (AML) laws.
Crypto mixer usage skyrockets in 2022
Over the years, there has been a significant increase in crypto mixer usage. In April 2022, Chainalysis notes that the value received by crypto mixers reached a 30-day all-time high of $51.8 million. This doubled the volumes that had been reported during the same period last year.
The increase in crypto mixer volumes comes from increased volumes sent from centralized cryptocurrency exchanges and decentralized finance (DeFi) protocols. The majority of addresses that were sending funds to these mixers were illicit.
DeFi protocols have also stood out in interactions with crypto mixers. DeFi protocols have recorded an increase in the percentage of all the volume sent to cryptocurrency mixers. However, this growth is understandable because of the increased prominence of DeFi in the global cryptocurrency sector.
The activities between mixers and illicit addresses have also grown. In 2022, illicit addresses accounted for 23% of the funds sent to mixers. This is a notable growth because the same number accounted for 12% in 2021. Moreover, during the second quarter of 2022, there was an increase in funds moving to mixers from sanctioned entities.
Despite the growth in the use of cryptocurrency mixers, these tools are set to become obsolete. Chainalysis, a blockchain analytics firm, is looking into the methods of demixing some of these transactions. This will ensure that blockchain investigators can still analyze illicit activity.
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