DOJ says use of privacy coins is 'indicative of possible criminal conduct'

Published at: Oct. 8, 2020

A new report from the U.S. Department of Justice alleges that crypto traders dealing with coins like Monero, Dash, and Zcash are engaging in “high-risk activities.”

According to the report by the U.S. Attorney General's Cyber Digital Task Force called Cryptocurrency: An Enforcement Framework released on Oct. 8, anonymity enhanced cryptocurrencies (AECs) can undermine existing anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations put in place by businesses engaged in virtual asset activities. The task force cited coins including Monero (XMR), Dash (DASH), and Zcash (ZEC).

“The Department considers the use of AECs to be a high-risk activity that is indicative of possible criminal conduct,” the report stated. “AECs are often exchanged for other virtual assets like Bitcoin, which may indicate a cross-virtual-asset layering technique for users attempting to conceal criminal behavior.”

According to the report, privacy coin holders can obfuscate the origin of their tokens using mixers, tumblers and chain hopping, undermining AML and CFT.

Chain hopping, which the DOJ claims is “frequently used by individuals who are laundering proceeds of virtual currency thefts,” involves swapping one’s crypto holdings for others operating on a different blockchain like Bitcoin (BTC) and Ethereum (ETH).

Mixers and tumblers make it difficult for investigators to trace funds by mixing crypto holdings from multiple traders before they’re sent to the appropriate wallet. The report cited a privacy tool called Helix, whose alleged administrator was arrested in February for laundering more than $311 million worth of Bitcoin.

“Operators of these services can be criminally liable for money laundering because these mixers and tumblers are designed specifically to ‘conceal or disguise the nature, the location, the source, the ownership, or the control’ of a financial transaction.”

Released today, the DOJ report itself is 83 pages of official guidelines for keeping crypto markets accountable in the United States. Among the more noteworthy assertions in the report is the department claiming jurisdiction over individuals whose crypto transactions interact with U.S.-based servers.

Tags
Regulation
United States
Privacy
Department Of Justice
Monero
Related Posts
Gemini crypto exchange adds shielded withdrawals for privacy coin Zcash
Gemini, a cryptocurrency exchange founded by the Winklevoss twins, aims to improve user privacy with a major privacy token, Zcash (ZEC). Starting Sept. 29, Gemini will support shielded withdrawals of ZEC, which allows users to hide their transaction data. Gemini representatives said that the new feature is the “first time shielded ZEC withdrawals are available on a regulated exchange.” The new option comes in line with Gemini’s mission to strengthen financial privacy and “empower the individual through crypto,” Gemini executives said. Launched in 2016, Zcash is a major privacy-focused cryptocurrency, enabling two user privacy levels through two types of addresses …
Regulation / Sept. 29, 2020
Updated: New US Treasury sanctions on Russian hackers aim for Monero
Per its Wednesday additions to its list of sanctioned individuals, the United States Treasury Department is targeting Monero (XMR) addresses. Russian nationals Dmitriy Karasavidi and Danil Potekhin have become the newest names on the specially designated nationals list. According to the Treasury’s announcement on the subject, the two engineered an elaborate phishing campaign targeting U.S. citizens in 2017 and 2018. Both parties had a number of cryptocurrency addresses including Bitcoin (BTC) and Ether (ETH), as well as Zcash (ZEC) and Litecoin (LTC). Surprisingly, Karasavidi’s information includes a Monero address: 5be5543ff73456ab9f2d207887e2af87322c651ea1a873c5b25b7ffae456c320. Given Monero's famous built-in privacy features, this is a huge …
Regulation / Sept. 16, 2020
The IRS offers a $625,000 bounty to anyone who can break Monero and Lightning
The United States Internal Revenue Service has offered a bounty of up to $625,000 to anyone who can break purportedly untraceable privacy coins such as Monero (XMR) as well as trace transactions on Bitcoin’s (BTC) Lightning Network. The official proposal, published last week, says the IRS will accept submissions in the form of working prototypes until Sept. 16. If accepted, applicants will receive an initial payment of $500,000. This grant will allow applicants to develop their prototype into a working concept over the next eight months. Once the pilot test is completed and approved by the government, a further $125,000 …
Technology / Sept. 11, 2020
Law Decoded: Governments vs. blockchain privacy, Sept. 4-11
Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law. Editor’s note One of the most persistent myths about Bitcoin is its supposed anonymity. More properly termed pseudonymity, BTC wallets are permanently tied to their public keys. Most of you know that. But it took government investigators years of trying to corral Bitcoin transactions on dark web marketplaces like the Silk Road to figure that out. Now, however, blockchain analysis is a growing industry, catering to a range of clients including many of the most shadowy of government agencies. This was …
Regulation / Sept. 11, 2020
Dash claims ‘inaccurate categorization’ as ShapeShift delists privacy coins
It shouldn’t come as a surprise that regulators are starting to pay close attention to cryptocurrencies this year. For instance, as the price of Bitcoin (BTC) continues to soar, it’s predicted that regulators will start taking direct action – possibly even banning Bitcoin completely. While the ban may sound extreme, regulators have recently honed in on the use of privacy coins like Monero (XMR), Zcash (ZEC) and Dash. For example, in September this year, the United States Internal Revenue Service offered a bounty of up to $625,000 for intelligence firms that could break the untraceable privacy coin Monero. Moreover, on …
Bitcoin / Nov. 16, 2020