In a recent update from the US Treasury Department, crypto mixers have been added to the sanctions list.
The US Treasury Department announced sanctions on cryptocurrency mixer Blender on Friday, accusing it of being involved in one of the greatest cryptocurrency heists ever and of being utilized by North Korea.
It was the first time the US levied penalties on a virtual currency mixer, according to the Treasury.
The Treasury also discovered 46 Bitcoin addresses and 12 Ethereum addresses, it claims were used to launder criminal earnings by the North Korean hacking organization known as “Lazarus”. The Treasury accused the group of stealing hundreds of millions of dollars in cryptocurrencies related to the popular online game Axie Infinity.
Brian Nelson, the Treasury’s under secretary for terrorism and financial intelligence, said
“We are taking action against illicit financial activity by the DPRK (North Korea) and will not allow state-sponsored thievery and its money-laundering enablers to go unanswered.”
North Korea has increased its use of mixers, or software tools that pool and scramble money from hundreds of addresses, in order to launder stolen cryptocurrency.
But for the uninitiated, this situation begs a question…
What is a crypto mixer?
A crypto mixer is basically a “pool” of crypto coins where a user can put in their money, and take out the same, but the withdrawn coins, although of the same kind, will be completely different from the ones put in. A mixer hides the transaction trail, severing the on-chain link between deposit and withdrawal.
Although this provides more privacy to users, illicit individuals have used such platforms for illegal activities such as money laundering.
On Tornado Cash, a popular crypto mixer, a user can deposit Ether, wait a few moments, and then withdraw different Ether as long as they produce the Tornado-generated random key to show they’re the original depositor.
Some crypto mixers are centralized, like Blender.io, while others like Tornado Cash, are decentralized, i.e. they run completely on code.
Retired Drug Enforcement Agency agent, Bill Callahan, told CoinDesk in January,
“Is Tornado Cash laundering money? They are certainly obfuscating it. But I’d be careful with the term money laundering. Pretend I’m running away from police with a bag of cash and jumping over fences, trying to evade capture … that’s not money laundering. If Tornado Cash knows who deposited the money and who took it out, that’s not money laundering.”
However, crypto mixers aren’t the only ways to hide the trail of a certain coin. Privacy wallets and privacy coins are also capable of hiding the source of the tokens. Privacy wallets, such as Wasabi Wallet, sever any connection between the currency holder and their identity. Monero, a popular privacy coin, is opaque by default.