Tech
EU agencies highlight concerns related to cryptocurrencies, both cryptography and cryptocurrency
The European Union Innovation Hub – a collaborative effort between various EU agencies and member states – recently published its inaugural report on cryptography. The report highlights the dual nature of cryptographic technologies, recognizing their potential for both positive and negative applications.
📢 Just published: new report on the use of encrypted communications in criminal investigations.
The report, from the EU Innovation Hub, highlights the balance between security and privacy.
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— Eurojust (@Eurojust) June 10, 2024
The report recognizes the critical role of public-private cryptography in the operation of cryptocurrencies AND non-fungible tokens (NFTs), who rely on these technologies for storage, mining and transfers. However, it is also underlined that some bad actors exploit the system to evade law enforcement, in particular through the use of protocols and privacy coins that can obscure visibility on the blockchain.
An evolving landscape
The EU Innovation Hub specifically identified cryptocurrencies such as Monero (XMR), Zcash (ZEC), Grin (GRIN) and Dash (DASH), as well as layer 2 initiatives, zero-knowledge proofs, crypto mixing services and non-exchanges compliant cryptocurrencies, as facilitators for bad actors to launder funds. The report states:
Mixers and privacy coins have complicated tracking for years, but Mimblewimble and zero-knowledge proofs are relatively new developments that can also obscure the visibility of cryptocurrency addresses, balances and transactions.
Cryptocurrency hackers and scammers often use services like Tornado Cash to siphon stolen funds and discourage tracking. However, this does not completely prevent the investigation:
All of these developments may still be investigated by law enforcement once they gain access to the suspect’s private keys.
The report was compiled by six members of the EU Innovation Hub for Internal Security: Europol, Eurojust, the European Commission’s Directorate-General for Migration and Home Affairs, the European Commission’s Joint Research Centre, the European Council’s Counter-Terrorism Coordinator and the European Union Union agency for the operational management of large-scale IT systems in the area of freedom, security and justice.