Coinjoin BTC mixing tool to block illegal transactions

CoinJoin, a popular Bitcoin (BTC) mixing tool, blocks transactions linked to or marked as illegal. The announcement came from the official Wasabi Wallet Twitter account, which Coinjoin is part of.

The official announcement noted that CoinJoin services would begin blocking certain unspent transaction outputs (UTXOs) from registering with the CoinJoin with the help of the zkSNACKs coordinator. A zkSNACKs coordinator is a virtual machine used to mix the origin of the transitions.

Privacy-focused mixing tools are mainly used to disguise the origin of the transactions and are often seen as a medium to launder illicit funds. However, because blockchain is a ledger and with several forensic tools developed by Chainalysis, money laundering through mixing tools has become quite difficult in recent years.

The company’s latest announcement had startled many privacy advocates who accused the privacy-focused wallet of bending over to law enforcement. However, a Wasabi developer by the Twitter name Rafe explained that they have not compromised on their core values, but must adhere to certain benchmarks.

Related: What Are Bitcoin Mixers and Why Are Exchanges Banning Them?

Rafe too orphan that blocking UTXOs is limited to the ZkSNACKs coordinator and people using another coordinator can still feel private and safe. However, Adam Fiscor, the founder of Wasabi wallet, acknowledged that blacklisting has come to the privacy wallet and believes it could pose a threat to Bitcoin’s fungibility.

Most governments and centralized entities have perpetuated a narrative about using cryptocurrencies for illegal activities and the role of privacy wallets and blending tools to help them. However, research and data analysis has from time to time shown that using crypto for illicit activities accounts for a very small proportion of total transaction activity and it has continuously declined with the emergence of more powerful analytic tools.

According to data from Chainalysis, the illegal share of all crypto transaction volumes fell to 0.15% by 2021.

Share of illegal transaction in crypto. Source: Chainalysis

The recent arrest of the husband-wife duo who were found to be trying to launder money from a multi-billion dollar Bitfinex hack is another prominent example, where the hackers weren’t just caught trying to launder the stolen money. , but the authorities managed to recover the majority of the hacked BTC as well.