Originally published on: October 06, 2024
A recent academic paper published in the Journal of Cybersecurity has sparked controversy by suggesting that governments should take action against public blockchains, particularly cryptocurrencies that prioritize user privacy, as a means to combat money laundering.
Titled “Reconciliation of Anti-Money Laundering Instruments and European Data Protection Requirements in Permissionless Blockchain Spaces,” the paper proposes various tactics to undermine trust in permissionless blockchains, including 51% attacks, price suppression, and Sybil attacks. These malicious activities involve manipulating networks by creating multiple accounts.
While the paper advocates for these methods to be used as a last resort after exhausting other regulatory measures like blacklisting wallet addresses, flagging transactions, and imposing sanctions, it emphasizes the importance of balancing regulatory compliance, innovation promotion, and individual user privacy protection.
The findings of the paper gained attention in light of suspicions that similar tactics are being deployed to manipulate the price of Monero, a privacy-focused cryptocurrency mentioned in the academic study.
Recent revelations by United Nations officials and the US Treasury have highlighted the prevalent use of cash by terrorist organizations and criminal groups to finance illicit activities, casting doubt on the effectiveness of targeting cryptocurrencies. The US government’s crackdown on privacy-enhancing tools such as Tornado Cash has further fueled debates on the survivability of such services in the face of increasing regulation.
As the debate rages on, the question remains: Can crypto mixers withstand the pressure of government scrutiny and regulatory challenges in their mission to protect user privacy?
