Crypto mixer

A crypto mixer, is a service that mixes cryptocurrency transactions from different users, creating a confusing exchange path and thus hiding the true origin of the cryptocurrency. The purpose of such services is to make it difficult to track the source or destination of cryptocurrency funds, which contributes to the anonymity of transactions on the blockchain. The principle of crypto mixers is that users send coins to a pool, where they are mixed with coins from other users. As a result, each participant receives back an equivalent amount of cryptocurrency, but with a different origin, which makes it difficult or impossible to track transactions.

Money laundering

One of the main reasons for using cryptocurrency mixers is money laundering. Cryptocurrencies, especially Bitcoin, were initially considered anonymous, but in practice, most cryptocurrencies are pseudonymous — meaning that transactions can be traced and linked to specific addresses. Cryptocurrency mixers allow criminals to obscure the origins of illegally obtained funds, making them nearly untraceable. This complicates the efforts of law enforcement agencies that are trying to detect and prevent financial crimes.

Anonymization of transactions

Not all users of cryptocurrency mixers are involved in illegal activities. Some people use mixers to protect their privacy. For instance, users may want to conceal their financial transactions from third parties, including governments or large corporations. This is particularly relevant in countries with authoritarian regimes or in situations where the confidentiality of financial information could be at risk.

Here is an example where the use of a mixer is permissible:

Recently, governments and international organizations have intensified their efforts to combat the use of cryptocurrency mixers. In some countries, laws have been introduced that ban the operation of such services. Financial regulators require exchanges and other participants in the cryptocurrency market to comply with Anti-Money Laundering (AML) rules and Know Your Customer (KYC) procedures, making the use of mixers more difficult.

Additionally, law enforcement agencies are conducting operations to arrest operators of cryptocurrency mixers and shut down such platforms. For example, in 2021, several major cryptocurrency mixers in Europe were shut down, signaling to criminals the increasing control over their activities. One of the blocked mixers was the largest mixer on the Ethereum network, Tornado Cash.

Mixers are a highly risky counterparty. AML Crypto's Btrace tool can help users avoid interacting with high-risk addresses, including mixers.

The interaction of an address with a mixer does not mean that the history of the origin of the funds is dirty, but it does mean that the history of the origin of the funds is unknown, which also makes the funds high-risk. Representatives of VASP (virtual asset service provider) warn users that if there are doubts about the legal origin of the funds at the user's address, the sources of origin of these funds will be checked. If the source is a mixer, the funds may be blocked. The Btrace tool will help to avoid unwanted interactions with risky addresses and minimize the possibility of blocking by exchanges and exchangers.