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Bitcoin Lightning Community and Layer 2 Scaling Might Be ‘Abused by Criminals’, Says EU

Bitcoin Lightning Community and Layer 2 Scaling Might Be ‘Abused by Criminals’, Says EU


A brand new report from the EU has singled out Bitcoin’s Lightning Community and different layer 2 options as “particulars obfuscation” applied sciences that may very well be “abused by criminals.”

The First Report on Encryption by the EU Innovation Hub for Internal Security, a “collaborative community of innovation labs” from throughout EU member states, argues that along with programs which incorporates Mimblewimble, zero-knowledge (zk) proofs, coin mixers and privateness cash these sorts of as Monero and Zcash, “layer 2 solutions this type of because the lightning community could probably even be abused by criminals.”

The report notes that the Lightning Community’s “two-bash multisignature fee channels won’t broadcast all transactions to the blockchain, however solely the opening and shutting of the channel,” together with that it and different layer 2 treatments might set off set off “issues for laws enforcement investigations.”

Privateness money and regulation enforcement

The report additionally takes intention at coin mixers similar to Tornado {Dollars}, and privateness cash together with Monero, Zcash, Grin and Dash.

It highlights their use of “zero-expertise proofs and layer 2 treatments” that allow some transaction data to be obscured, which “drastically complicates tracing the origins of (illicit) cryptocurrency for laws enforcement.”

Cryptographic protocol Mimblewimble, utilized by cryptocurrencies which embody Grin, Beam and Litecoin, is taken into account a “complicating difficulty,” in legislation enforcement’s makes an attempt to hint cryptocurrency transactions, whereas the report’s authors conced that, “transactions using Mimblewimble aren’t continuously encountered.”

Privateness money have been matter to regulatory pressure from governments within the newest months.

The EU’s Marketplaces in Crypto Belongings (MiCA) framework, which can come into energy on the end of 2024, cracks down on interactions amongst crypto-asset firm suppliers (CASPs) and privateness money, prompting crypto exchanges this type of as Binance to delist them.

Crypto mixers have additionally come beneath pressure from legislation enforcement companies all over the world, with Tornado Cash developer Alexey Pertsev discovered accountable of earnings laundering by a Dutch court docket docket.

In April, U.S. authorities arrested and charged the founders of Bitcoin mixer Samourai Pockets with conspiracy to commit money laundering. The crackdown has skilled a chilling outcome on different privateness assets, with quite a few coin mixing services and products abandoning the U.S. within the wake of the Samourai Pockets arrests.

Edited by Stacy Elliott.

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