Cryptocurrency mixing services are a divisive subject in the industry. Some advocate for the privacy-enabling features of these protocols while others maintain that they are mainly used for illicit means.
For platforms like Tornado Cash, the mainstream verdict is “guilty as charged.” The infamous decentralized mixing protocol was sanctioned by the United States Office of Foreign Assets Control (OFAC) in August 2022, essentially making it illegal for anyone to make use of the service.
Tornado Cash continues to be a contentious topic and one of its developers, Alexey Pertsev, controversially remains in detention in the Netherlands while investigators look to build a case against the Russian developer and his alleged role in the mixer’s operation.
In a proverbial sense, one man’s loss is another man’s gain and that seems to be the case for cryptocurrency mixers according to a report from blockchain analytics firm Elliptic.
A blow to money-laundering operations
As highlighted in its analysis, Elliptic reveals that over $7 billion worth of cryptocurrencies were processed by Tornado Cash. An estimated $1.54 billion of illicit cryptocurrency was laundered through the platform, with a user base that included the likes of North Korean Lazarus Group state hackers.
In the wake of OFAC’s sanctions, Tornado Cash liquidity pools saw their holdings drop by 60% which is said to have drastically reduced the anonymizing potential of the platform for large-scale money laundering operations.
With Tornado Cash ostensibly shut down, a number of alternative mixing services have been identified as potential threats to cryptocurrency service providers and criminal investigators. Elliptic highlights six different protocols that have been used as mixers in the wake of Tornado Cash’s prohibition.
Not all mixers are being used for illicit means
Elliptic’s report unpacks how these mixer protocols operate in different ways and provide a variety of outcomes for potential users. A top-down view shows that these obfuscation protocols have mixed over $41 million of cryptocurrency, which pales in comparison to the total amount that was processed by Tornado Cash.
Ether (ETH), BNB (BNB), Wrapped Ether (wETH) and Tether (USDT) are the most commonly mixed tokens, given their usability within decentralized finance (DeFi). Elliptic’s figures notably exclude Polygon-based tokens.
Two particular protocols account for the highest mixing capacity of the tools analyzed and as a result,…
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