Bitcoin crime proceeds have been laundered in the privacy wallets, just from 2% in the previous year, according to a report from Elliptic. The company stated that number represents “over $160 million in bitcoin from darknet markets, thefts, and scams.”
Privacy wallets are services that enable coin “mixing,” a process that swaps the coins with other coins, namelessly, and obscures the transactions’ single inputs and outputs. Bitcoin has been developed with complete transparency in mind, and a public ledger that is available to anyone in the world: the services border the idea.
Developers pitch privacy wallets as providing a measure of financial privacy, which they do—that also happens to make them a good option for criminals looking to launder stolen funds through a transparent system, according to Elliptic.
Elliptic co-founder Tom Robinson said that while the open-source privacy wallet developers didn’t bear responsibility for the uptick in criminal activity, things will be more complicated in the case of a company like the Wasabi Wallet, which charged fees for every anonymous transaction and could make money off the criminal activity.
“The grey area is where someone is facilitating specific transactions that might be linked to illicit activity,” he said. “The way that Wasabi Wallet functions are that there is a company involved in actively facilitating transactions and taking a fee for doing so—I think an open question is the responsibility of that company and whether they are themselves subject to regulation.”
Wasabi Wallet made the news last summer when people hacked Twitter and scammed the users into sending them Bitcoin and laundered their stolen money via Wasabi Wallet. And last September, hackers went after KuCoin similarly.
The spokesperson for Wasabi Wallet, Ricardo Masutti emphasized last month that the app is “not intended for criminals to launder money,” although, seemingly, criminals are not discouraged.