EU takes on crypto privacy, Monero faces tough challenge

The European Union is toughening its tone against privacy tokens and crypto mixers. In a shocking report, she accuses them of facilitating illicit activities and threatens to strictly regulate them, at the risk of offending the crypto community attached to decentralization.

The EU is looking into regulating privacy tokens!

In its first-ever crypto report, the EU Innovation Hub scrutinizes technologies for obfuscating crypto transactions. Created by several agencies including Europol and Eurojust, this consortium is concerned about the risks these tools pose to financial traceability and the fight against money laundering.

THE report specifically pins certain privacy cryptos such as Monero, Zcash, Grin or Dash. Their encryption protocol would make transactions completely opaque and complicate law enforcement surveillance efforts.

The latest innovations, such as Mimblewimble or zero-knowledge proofs, have attracted criticism for their ability to hide addresses, balances and flows.

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Crypto mixers in the viewfinder

But it is especially the “mixing” services that attract criticism. These platforms blur the lines by mixing different sources of crypto assets, a threat according to the EU to trace funds of illicit origin. “ These tools have been making tracking difficult for years » we can read, citing Tornado Cash as an example.

If the EU recognizes that anonymous transactions remain traceable when the private keys are known, it seems determined to better regulate this opaque part of the crypto ecosystem. A hard line which follows the conviction of the developer of Tornado Cash for money laundering, despite the non-custodial nature of the protocol.

Regulators must now find the right balance between the protection of privacy, recognized as legitimate by the report, and the ability to untangle illicit financial flows.

New, stricter rules on confidential protocols and mixing services could well see the light of day, at the risk of offending the founding principles of cryptos.

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