UK's NCA Looks to Regulate "Crypto Mixers"

The United Kingdom’s National Crime Agency (NCA) has announced its plans to regulate “crypto mixers” to decrease criminals’ money laundering activities. The agency is concerned that criminals looking to launder funds are using this practice to allow themselves greater protection and anonymity.  

Coin mixing is essentially the practice of sending your existing cryptocurrency to a mixing tool that incorporates them with a massive collection of other cryptocurrencies and assets. In turn, the mixer will send back smaller amounts of cryptocurrency to the address you choose. The amounts sent back will be equal to the total amount of coins initially put in minus a 1-3% fee charged by the coin mixer. Commonly known mixers include Bitcoin Blender, Helix, and Ultramixer.

Not surprisingly, this mixing practice has become very popular among hackers and criminals, as it is an easy way for them to provide themselves additional protections making it more difficult for fraudulent transactions to be traced.  

A recent article quotes Gary Cathcart, NCA’s head of financial investigation, saying these tools are used for, "churning criminal cash, obscuring its origins and audit trail." 

He has urged the NCA to begin regulating these mixing tools under current money laundering laws, which will provide laundering checks and audits for transactions going through mixers.  

Because of the decentralized nature of these systems, regulation of crypto mixers will not be an easy task. The process of providing checks will likely prove to be very intricate for regulators. One example comes from Nunchuck, a popular crypto wallet, which stated they do not obtain information from users due to the basic decentralized design of digital assets.  

Meanwhile, many cryptocurrency companies have already been very compliant with regulations and have amended their services to comply with guidelines by regulators. One wallet, Wasabi, has even taken the initiative to ban any incoming illicit transactions. 

Although tracing transactions may prove to be rather complicated, they are not totally impossible if utilizing the right analytical tools, such as ones used to identify hackers involved in the $40 million Binance hack.